Jharkhand High Court
State Bank Of India, R.I.T. Branch vs Bihar Central Trading Company ... on 20 August, 2004
Equivalent citations: AIR2005JHAR33, III(2005)BC75, [2004(4)JCR424(JHR)], AIR 2005 (NOC) 33 (JHA), 2004 AIR - JHAR. H. C. R. 2942, 2004 AIR - JHAR. H. C. R. 3100, (2004) 3 JCR 391 (JHA), (2004) 3 JLJR 313, (2005) 1 BANKCAS 139, (2005) 1 BANKJ 484, (2005) 3 BANKCAS 75, (2004) 4 JLJR 122, (2005) 1 CIVLJ 845, (2005) 1 BANKCLR 805
Author: Hari Shankar Prasad
Bench: Hari Shankar Prasad
JUDGMENT Hari Shankar Prasad, J.
1. This appeal is directed against the judgment dated 2nd April, 1992 and decree dated 3rd July, 1992 (decree having been sealed and signed on 3rd July. 1992) passed in Money Suit No. 12 of 1983 whereby the learned Sub-Judge" 11, Seraikella decreed the suit in part.
2. The case of the plaintiff-appellant in brief is that defendants-respondents is a small scale industrial unit within the Industrial Area, Adityapur and other respondents are the partners of the said industrial unit. The defendant No. 7 Bihar State Finance Corporation represented by the Branch Manager, BSFC. Jamshedpur and defendant No. 8 Ashok Kumar Jha are proforma defendant whereas defendant Nos. 2 to 6 are principal defendants and they are partners of the firm M/s. Bihar Central Trading Company, Defendant No. 1 had approached the plamtriff-bank for cash credit facilities to the extent of Rs. 2.40 lakh only for their working capital which was granted on or about 13,9.1979 on execution of necessary securities and documents under the bank's usual terms and condition. Further case of the plaintiff is that the defendants further approached the plaintiff-bank for enhancement of their credit facility limit to the tune of Rs. 3.00 lakh only to meet their working capital requirement as it was required for enlarged scale of operation of the unit. The plaintiff after being satisfied with the reasoning, granted cash credit facilities up to Rs. 3.00 lakh on or about 28.4.1980 with interest at t-he agreed rate at quarterly rests on security of pledge of goods, produce and merchandise. There was also stipulation that the sale proceeds of the pledged goods will be deposited with the plaintiff-bank towards payment of the advance with interest and the defendant Nos. 2 to 6 has stood as guarantors for the said advance made by the plaintiff-bank in favour .of defendant No. I. At the time of filing of the plaint, prevailing rate of interest was 16 percent per annum and the defendant Nos. 2 to 6 agreed at the rate of interest and executed the following documents for the advance of loan facilities by the plaintiff-bank :-
(a) Demand Promissory note dated 20.4.89 for Rs. 3,00.000;
(b) Demand Promissory note delivery letter dated 28.4.80;
(c) Agreement for Cash Credit, Pledge Form 'C' general dated 20.4.80 for Rs. 60,000;
(d) Agreement for cash credit. Pledge, .Form 'C' (General) dated 13.9.1979 for Rs. 2,40,000;
(e) Supplementary letter dated 28.4.80 confirming the two cash credit. Form 'C' (General) agreement':
(f) Agreement *B' under Public Demands Act, dated 28.4.80 for Rs. 3,00.000;
(g) Agreement 'C' under Public Demands Recovery Act. 'dated 28.4.80 for Rs. 3.00.000;
(h) Guarantee Agreement Form *1' (Special) dated 28.4.80 for Rs. 3,00,000;
(i) Letter dated 13.9.79 acknowledging Bank's Padlock's and Keys;
(j) Letter dated 13.9-79 confirming the implications of all the agreements;
(k) Equitable Mortgage by deposit of Title deeds In respect of land with construction at Rahatopara Road. Jugsalal. bearing Plot No. 1004. Holding Nos. 207(R) and 289 under khata No. 39, of Mouza Jugsalai. Thana No. 1161 P.S. Jugsalal. District Singhbhum area of the land approximately 7500 Sq. feet, as collateral security for the advance made by the plaintiff-Bank."
3. Plaintiff-bank used to send the statement of accounts at monthly intervals to defendants and these statements of accounts were furnished to the defendants on 13.12.1982 which was acknowledged by the defendant No. 4 on the duplicate copies of the bank. Similarly, defendants also used to avail the said facilities and drew amount from time to time and the same was being debited to the said account with interest at quarterly rests. But the cause of action in the suit arose when defendants committed breach of the Agreement and failed to pay to the bank despite notice served upon them by the plaintiff-bank and they defaulted in complying with the terms and conditions of the Agreement entered into between the parties. Sometime thereafter, defendants totally stopped transaction with the bank. The plaintiff-bank had alleged that- the defendants obtained loan from Bihar State Financial Corporation, Jamshedpur for acquiring fixed assets and M/s. Bihar Central Trading Company stood as party against the advance made to the defendants. The current assets of the Bihar Central Trading Company (defendant No.l) were pledged to the plaintiff-bank. The defendants closed the operation of the unit without any information to the plaintiff-bank and when plaintiff-bank made inquiry, it could learn that defendants had sold the unit to one Ashok Kumar Jha (defendant No. 8) at the instance of defendant No 7 through the private arrangement without the concurrence of the plaintiff-bank, but nothing was done by the principal defendants to pay the due to the bank and, therefore, plaintiff-bank has filed the suit for recovery of the amount.
4. The defendants-respondents appeared and filed written statement on behalf of the defendant Nos. 1 to 6 taking a plea that there was no cause of action In the suit and. therefore, suit Itself Is not maintainable. Defendants-respondents have admitted the statement made in paras 1 and 2 of the plaint and statement made in paras 3 and 4 of the plaint are admitted but not in whole and, in this connection, defendants have stated that credit facilities, for the first time was given upto Rs. 1.25 lakh which was subsequently raised, from time to time. up to Rs. 3.00 lakh and the defendants-respondents have challenged the rate of Interest claimed by the plaintiff bank-appellant, which was at concessional rate. It was contended that at the initial stage, rate of interest was II percent per annum and later it was enhanced up to 16 percent per annum. The defendants have alleged that they are unaware of the documents, as they were in need of the money, plaintiff-bank went on getting their signatures on some papers and they went on signing those papers. Defendants have denied letters as referred in Para-6(i) and (j) of the plaint and have also denied that signatures upon those letters were taken but on blank printed letters. The defendants have also denied that they made any equitable mortgage by deposit of title deeds in favour of the plaintiff- banks and the said document of title deeds were deposited in the RIT branch of State Bank of India. but not to create any enforceable equitable mortgage in respect of the properties covered by the title deeds to show financial condition of the defendants. The defendants have further alleged that operation in the bank was stopped because of the conspiracy between plaintiff-bank and defendant No. 7 to stop the operation of the defendant's bank account which completely crippled the defendants and caused stoppage of production. It was also alleged that the defendants No. 1 respondents had applied for loan of Rs. 10.00 lakh before plaintiff-bank which was pending before it and it was ultimately rejected inspite of recommendation of the technical officer of the bank. The plaintiff-bank could have saved the industry of the defendant No, 1 if loan as recommended by the senior officer was granted. It is alleged that defendant No. 7 had entered into a deal with defendant No. 8 for sale of industry at nominal amount and thereby sold their unit to him. It was stated that the fixed assets and machineries etc. of the defendant No, 1 were given to the plaintiff Bank only as second charge and the firm's assets were sufficient to liquidate the BSFC.'s entire outstanding as well as of the plaintiff-bank. It was alleged that the plaintiff-bank deliberately played into the hands of the then Branch Manager of defendant No. 7 and the plaintiffs assertion that the defendant's unit was closed without giving any information to the plaintiff Bank is false. The Bank Manager was present at the auction held by Defendant No. 7 as two inventories were prepared on the spot inside the factory premises in the presence of the plaintiff as well as defendant No. 7. The defendants have asserted that their -signatures were taken on the said inventories under threat and It was stated that the valuation of the aforesaid articles was put at Rs. 1.25 lakh. It was asserted that in this way the raw materials, finished products as well as the alleged car of the defendants were clandestinely removed from the factory premises when the same was given in charge of defendant No. 7 through defendant No. 8 but the same were not returned back to the defendants inspite of several requests to the plaintiff-bank to whom those were hypotheticated. It was alleged that to save their properties the defendants filed a writ petition before the Hon'ble High Court for preventing the defendant No. 7 form taking over their Unit and from transferring the same to defendant No. 8 and on the said writ petition the Hon'ble High Court was pleased to stay the operation of the sale order but despite the said order, the clandestine deal was carried out. It has further been stated that the plaintiff has willfully abandoned their claim to the hypothecated and charged properties and hence they did not claim any relief against defendant Nos, 7 and 8 especially when the properties valued at about Rs. 16 lakh were already in possession of defendant Nos. 7 and 8 for realization of a loan of Rs. 3 lakh. It was also stated that the properties of the defendants be sold by the Court to satisfy the claim of plaintiff. Defendant Nos. 7 and 8 or the Court might be pleased to take over the said properties to meet the claim of the plaintiff-bank. It was therefore stated that the attitude of the plaintiff Bank has been thoroughly inequitable and so the reliefs sought for in the present suit are not fit to be allowed. It was also urged that the rate of interest was fin excess of agreed rate and hence not fit to be decreed.
5. On the pleadings of the parties, learned Court below framed following issues for their determination :-
"1. Is the suit maintainable in its present form?
2. Has the plaintiff got any cause of action for the suit?
3. Is the suit barred by law of limitation. waiver, estoppel and acquiescence?
4. Was there any conspiracy in between the plaintiff and defendant Nos. 7 and 8 to grab the industrial Unit of defendant Nos. 1 to 6 ?
5. Is the plaintiff-bank a party to the aforesaid sale of the industrial Unit of defendant Nos. 1 to 6 ?
6. Was there any willful negligence or deliberate in motive on the part of the plaintiff-bank due to which transaction in favour of defendant Nos. 1 to 6 to run the Unit in question was stopped causing the sale of the Unit in favour of defendant No. 8 ?
7. Were the articles finished, unfinished goods and other materials available in the factory premises sufficient to meet the claim of the plaintiff-bank ?
8. Is the valuation of the articles taken over by Bihar State Financial Corporation and sold out in favour of defendant No. 8 much more than the very claim of the Bihar State Financial Corporation ?
9. Is the plaintiff entitled to any Interest pendentilite future and other ?
10.1s the plaintiff entitled for the interest claimed by it at the rate of 16% P.A. ?
11. To what relief of reliefs, if any. is the plaintiff entitled?"
6. While deciding the case. issue Nos. 4, 5. 6, 7 and 8 were decided against the plaintiff and in favour of the contesting defendant Nos. 1 to 6, Similarly, issue Nos. 9 and 8 were partly allowed. Issue No. 3 was decided in favour of the plaintiff as it was held that suit is not barred by limitation, waiver, estoppel, etc. Issue Nos. 1. 2 and 11 were accordingly decided and in the result, suit was decreed in part.
7. While summing up the order, the learned Court below gave order and direction that amount ofRs.2,50.000/-, the cost of the article seized by the plaintiff-Bank on 4.3.1983 at the time of taking over of the said unit. is to be deducted out of the claim of the plaintiff-Bank made in the present suit. Further an amount of Rs. 1.00 lac, which has further been paid and deposited in favour of the plaintiff-Bank during the pendency of the suit by Bank draft, is also to be deducted and adjusted towards the claim made by the plaintiff-Bank In the present suit. Further contesting defendants are liable to pay the balance amount, whatever it comes, accounted on 4.3.1983. the aforesaid date of take over of the factory from the contesting defendants In 60 equal installments. Further the plaintiff-Bank is not entitled for any pendentelite and future interest from the date of taking over of the industrial unit of the contesting defendants i.e. 4.3.1983. in which the plaintiff-Bank also participated and which has been set aside by Hon'ble Court's order. Further the contesting defendants are liable to pay an interest @ 6% only in case of default of payment of any instalment but with respect to the amount not paid in time only. On this order and direction the suit was decreed in part.
8. While assailing the impugned judgment, learned counsel for the appellant submitted that the defendants-respondents is not entitled to claim adjustment of Rs. 2.50 lakh on the ground that no such plea was taken in written statement filed on behalf of the defendants- respondents Nos. 1 to 6. In this connection, learned counsel for the appellant referred to Order XIII, Rule 9, CPC wherein it is provided that for claiming adjustment of money, the fact should come In the written statement. Rule 6 of Order XIII is quoted herein below :-
"6. Particular's of set-off to be given in written statement.-(1) Where In a suit for the recovery of money the defendant claims to set-off against the plaintiffs demand any ascertained sum of money legally recoverable by him from the plaintiff, not exceeding the pecuniary limits of the jurisdiction of the Court, and both parties nil the same character as they fill in the plaintiffs suit, the defendant may, at the first hearing of the suit, but not afterwards unless permitted by the Court, present a written statement containing the particulars of the debt sought to be set off.
(2) Effect of set-off-The written statement shall have the same effect as a plaint In a cross-suit so to enable the Court to pronounce a final judgment in respect both of the original claim and of the set-off, but this shall not affect the Hen, upon the amount decreed, of any pleader in respect of the costs payable to him under the decree.
(3) The rules relating to a written statement by a defendant apply to a written statement in answer to a claim of set-off."
9. It was further pointed out that defendant Nos. 1 to 6 cannot claim the set-off on the ground that no such plea has been taken in the written statement and further, no Court fee, on the ground as stated in the written statement, has been paid. It was further pointed out that Rules 6 to 8 including Rule 6 A of Order VIII deal with set off counter claim to be claimed by defendants in suit but neither defendants-respondents in the written statement have made such a claim of set off nor counter claim nor had paid Court fee thereon for the amount of set off or counter claim and the amount does not appear to be ascertained one. whereas It should be ascertained amount of claim or set off. Learned counsel further pointed out that the learned Court below committed an error of law in allowing adjustment off Rs. 2,50,000/- towards claim of the plaintiff for a sum of Rs. 6,43,000/- and odd and the amount of Rs. 2,50,000/- cannot be adjusted towards that . The learned counsel further pointed out that a sum of Rs. 1,00 lac, which defendants said to have paid during the pendency of the suit Is also not adjustable as there being no such specific claim in the written statement.
10. On the other hand, learned counsel for the defendants-respondents submitted that learned Court below, while deciding the suit, had allowed adjustment of Rs. 2.50.000/- towards claim of the plaintiff. The learned Court below also found that plaintiff-appellant in conspiracy with the proforma-defendant No. 7 did not allow loan of Rs. 10,00,lacs on the petition field and okayed by senior officer of the plaintiff-appellant, as a result of which the defendants-respondents had to close the factory and the learned Court below has also found such nexus in between the two parties. The learned counsel further pointed out that the-High Court, in writ petition No 362/82(R). has passed an order against the plaintiff and thus the learned Court below gave a finding to that effect. The value of hypothecated goods and other articles lying at the site of the factory was to the tune of Its. 16.00 lacs and by proper sale the dues could have been adjusted from the amount of sale but due to connivance of the plaintiff with the defendant No. 7 no such thing could be done and, therefore, defendants-respondents are not liable for the same and are entitled to claim these amount,
11. On perusal of the provisions of Rules 6 to 8 of Order VIII of the Code. It is clear that when a defendant claims set off or puts counter claims then amount should be ascertained one and he should make out a specific claim in the written statement and should pay a Court fee on that amount also. Although learned counsel for the defendants-respondents has submitted that paragraphs 7. 8 and 9 of the written statement make out a specific case and from perusal of those paragraphs 7.8 and 9 of the written statement no such claim appears to have clearly been made out and further that no Court fee on the amount so claimed has been paid and, therefore, this amount cannot be adjusted against the claim made by the plaintiff-appellant.
12. It is clear from the impugned judgment that issue Nos. 4 to 8 have been decided in favour of the defendants and against the plaintiff and a sum of Rs. 2,50,000/- has been allowed to be adjusted towards the claimed amount but that finding is not correct in view of the provision as cited above because no Court fee has been paid nor any ascertained amount of money has been claimed as set off or a counter claim has been put. Thus, so far as this finding of the learned Court below is concerned, it is not correct and that finding is set aside and the appellant is entitled to this much amount from the defendants-respondents.
13. The learned Court below has also allowed adjustment of Rs. 1.00 lac, which has been claimed by the defendant-respondent on the ground that a sum of Rs. 1.00 lac was paid during pendency of the suit by Bank draft in favour of the plaintiff-appellant. The learned counsel for the respondent has submitted that this amount should be adjusted as against the claim of the plaintiff-Bank but. on the other hand. learned counsel for the appellant, submitted that no prayer for adjustment was made in the suit under Order XXIII, CPC nor there was an admission from the side of the plaintiff-Bank that it was adjustable in the suit itself and. therefore, this amount cannot be adjusted. But question is that when the amount has been paid in favour of the plaintiff-Bank during the pendency of the suit, then amount should be adjusted towards the claim of the plaintiff. Since from perusal of the record, it does not appear that the plaintiff has sought adjustment of Rs. 1.00 lac towards principal or paid interest and in such a situation the amount so paid during the pendency of the suit shall be adjusted towards first Interest and if some amount still remains to be adjusted then that amount shall be adjusted towards principal and, therefore this claim of the respondents is allowed and the amount so paid shall be first adjusted towards Interest and after adjustment if any amount remains still to be adjusted, then the same may be adjusted towards principal.
14. Another point, which has been taken up in this appeal, is that the learned Court below has committed error of law in appreciating the provision of Section 34 of the Code of Civil Procedure, which clearly lays down that when there is an agreement between the parties over payment of interest, that agreement cannot be modified. Section 34 of the Code of Civil Procedure is quoted hereinbelow-
"34 Interest-(1) Where and in so far as a decree is for the payment of money, the Court may. in the decree, order interest such rate as the Court deems reasonable to be paid on the principal sum adjudged, from the date of the suit to the date of the decree, in. addition to any interest adjudged on such principal sum for any period prior to the institution of the suit with further interest at such rate not exceeding six percent per annum, as the Court deems reasonable on such principal sum, from the date of the decree to the date of payment, or to such earlier date as the Court thinks fit:
Provided that where the liability In relation to the sum so adjudged had arisen out of a commercial transaction, the rate of such further interest may exceed six percent per annum, but shall not exceed the contractual rate of interest or where there is no contractual rate. the rate at which moneys are lent or advanced by nationalized banks in relation to commercial transactions.
Explanation 1. In this sub-section, "nationalized bank" means a corresponding new bank as defined in the Banking Companies (Acquisition and Transfer of Undertakings) Act. 1970 (5 of 1970).
Explanation 11. For the purposes of this section, a transaction is a commercial transaction, if it is connected with the industry, trade or business of the party incurring the liability.
(2) Where such a decree is silent with respect to the payment of further interest on such principal sum from the date of decree to the date of payment or other earlier date. the Court shall be deemed to have refused such interest, and a separate suit therefore shall not lie."
15. From perusal of Section 34. CPC, it is clear that when in a commercial transaction rate of interest has been agreed upon between the parties then Court will allow interest on the same rate and adjust at the rate not beyond the contractual rate. In the instant case also the Court has not awarded interest beyond the contractual rate and the plea of the defendants-respondents that on plain paper their signatures have been obtained will not be of any help to them because from perusal of those documents, which have been exhibited by the plaintiff- Bank-appellant, it is clear that those papers are printed one and if the defendant did not put his signature thereon, it is he, who will be responsible and not the Bank because defendant has not contravened that credit facility was not provided to him as per agreement and he was provided less than the amount of credit facility of Rs. 3.00 lacs and, therefore the defendants-respondents have not been able to show that there was any variation in the terms of the agreement. Hence the finding of the learned Court below refusing the amount of interest on the ground that defendants-respondents were not aware of the rate of interest and that they were forced to sign on blank paper and any terms of the agreement were later on prepared does not appear to be correct and In that view of the matter, the finding of the learned Court below is also set aside and contractual rate, as agreed upon between the parties, will be the rate of interest, which will be allowed to the plaintiff-appellant. Hence the plaintiff-Bank will be entitled to interest at the contractual rate and not @ 6% per annum and the plaintiff-Bank will also be entitled to interest pendentelite and future till final payment in this regard.
16. From the discussions made above, it appears that judgment requires some interference to the extent as observed above and to that extent the findings of the learned Court below are hereby set aside and the suit is decreed. However, there will be no order as to costs.