Karnataka High Court
A S Muktedar vs State Bank Of India on 3 January, 2014
Author: K.L.Manjunath
Bench: K.L.Manjunath
1
IN THE HIGH COURT OF KARNATAKA AT BANGALORE
DATED THIS THE 03RD DAY OF JANUARY, 2014
PRESENT
THE HON'BLE MR. JUSTICE K.L.MANJUNATH
AND
THE HON'BLE MR. JUSTICE A.V.CHANDRASHEKARA
R.F.A. NO.2518/2007
C/W
R.F.A. NO.2006/2007
IN R.F.A. NO.2518/2007
BETWEEN
1. A S MUKTEDAR
C/O ASHIRWAD ENTERPRISES
NO.25/26,KEMPEGOWDA ROAD,
NARTHAKI THEATRE
BANGALORE-560009.
2. MR B BOMMAIAH
NO.139,3RD MAIN ROAD,
9TH CROSS,CHAMARAJPET,
BANGALORE.
3. MR NARASIMHAIAH
25/26.KEMPEGOWDA ROAD,
NARTHAKI THEATRE
BANGALORE 560009
4. M/S AASHIRVAD ENTERPRISES
EXCISE CONTRACTORS,
A PARTNERSHIP FIRM BY ITS PARTNER
2
ASHOK ROAD,
RAICHUR-584101.
5. MR GOPAL
C/O ASHIRWAD ENTERPRISES
ASHOK ROAD,
RAICHUR-01.
6. MR PRAKASH M SHINDE
23,LOWER PALACE OLRCHARDS,
BANGALORE.
7. MR VENKATESH M SHINDE
23,LOWER PALACE OLRCHARDS,
BANGALORE.
8. V.V.RAMAN
NO.J-127
LAXMINARAYANAPURA
BANGALORE-560021
... APPELLANTS
(BY SRI JAYNA KOTHARI & C K NANDAKUMAR, ADVS.)
AND
1. STATE BANK OF INDIA
REP.BY ITS BRANCH MANAGER
SADASHIVNAGAR BRANCH,
BANGALORE-80.
2. MR VENKATESH DUTT
PROP: INTER CORP.ASSOCIATES,
NO.11,BRUNTON ROAD CROSS,
BANGALORE 560025
3. MR K V & COMPANY
EXCISE CONTRACTORS,
ARASIKERE,
3
KARNATAKA STATE. 577101
4. MR K C BHARATH S/O K S CHANDRASHEKAR
PARTNER MR.K.V.& COMPANY,
EXCISE CONTRACTORS, ARASIKERE,
KARNATAKA STATE.577101
5. MR H K RAMAREDDY
S/O LATE H K GOVINDA REDDY
PARTNER MR.K.V.& COMPANY,
EXCISE CONTRACTORS,ARASIKERE,
KARNATAKA STATE.577101
... RESPONDENTS
(BY SRI. SUBRAMANYA R FOR M/S ASHOK HARNAHALLI,
ASSTS. FOR R1
SRI GANESH KUMAR FOR R2
R3 TO R5 SERVED)
RFA FILED U/S.96 R/W O XLI R 1 OF CPC AGAINST
THE JUDGMENT AND DECREE DT.30.5.2007 PASSED IN
O.S.NO.10041/1990 ON THE FILE OF THE XXVI ADDL.
CITY CIVIL AND SESSIONS JUDGE, MAYOHALL,
BANGALORE (CCH-20), DECREEING THE SUIT FOR
RECOVERY OF MONEY.
IN R.F.A. NO.2006/2007
BETWEEN
1. MR K VENKATESH DUTT
PROP INTER CORP
ASSOCIATES
NO.11 BRUNTON ROAD CROSS
BANGALORE 25
2. M/S K V AND COMPANY
REPRSENTED BY MR.K.VENKATESH DUTT
MANAGING PARTNER
EXCISE CONTRACTORS
ARSIKERE
4
KARNATAKA STATE
3. MR K C BHARATH
S/O K.S.CHANDRASHEKAR
PARTNERS M/S K.V.AND CO
EXCISE CONTRACTORS
ARSIKERE
KARNATAKA STATE
4. MR H K RAMAREDDY
S/O LATE H K GOVINDA REDDY
PARTNER
M/S K.V.AND COMPANY
EXCISE CONTRACTORS
ARSIKERE
KARNATAKA STATE
...APPELLANTS
(BY SRI. GANESH KUMAR R, ADV.)
AND
1. STATE BANK OF INDIA
C/O AASHIRVAD ENTERPRISES
25/26 NARTHAKI THEATRE
MEPEGOWDA ROAD
BANGALORE 560080
2. MR A S MUKTEDAR
C/O AASHIRVAD ENTERPRISES
25/26 NARTHAKI THEATRE
MEPEGOWDA ROAD
BANGALORE 560009
3. MR V V RAMAN N
NO.J-127 LAKSHMINARAYANAPURA
BANGALORE 560021
4. MR B BOMMAIAH
NO.139 3RD MAIN ROAD
5
9TH CROSS CHAMARAJPET
BANGALORE
5. MR NARASIMHAIAH
NARTHAKI THEATRE
25/26 KEMPEGOWDA ROAD
BANGALORE
6. M/S AASHIRVAD ENTERPRISES
EXCISE CONTRACTORS
A PARTNERSHIP FIRM
BY ITS PARTNERS
ASHOKA ROAD
RAICHUR 584101
7. MR GOPAL
C/O M/S AASHIRVAD ENTERPRISES
ASHOKA ROAD
RAICHUR 584101
8. MR PRAKASH M SHINDE
23 LOWER PALACE ORCHARDS
BANGALORE
9. MR VENKATESH M SHINDE
NO.23 LOWER PALACE ORCHARDS
BANGALORE
... RESPONDENTS
(BY SRI JAYNA KOTHARI, ADV.
SRI. SUBRAMANYA, ADV. FOR M/S ASHOK HARNAHALLI
ASSOCIATES, ADVS.FOR R1
SRI.K.NANDA KUMAR, ADV.FOR R2, 4 TO 9
R3 ABATED)
RFA FILED U/SEC.96(1) OF CPC AGAINST THE
JUDGMENT AND DECREE DT.30.5.2007 PASSED IN
O.S.NO.10041/1990 ON THE FILE OF THE XXVI ADDL.
CITY CIVIL AND SESS. JUDGE, MAYOHALL, BANGALORE,
(CCH-20) DECREEING THE SUIT FOR RECOVERY OF
MONEY.
6
THESE APPEALS HAVING BEEN HEARD AND
RESERVED FOR ORDERS COMING ON FOR
PRONOUNCEMENT OF ORDERS THIS DAY,
A.V.CHANDRASHEKARA, J., DELIVERED THE
FOLLOWING:
COMMON JUDGMENT
Both these appeals are directed against the judgment and decree passed by the learned XXVI Addl. City Civil Judge, Bangalore, in O.S.No.10041/1990 dated 30.05.2007.
2. Appellants in RFA No.2518/2007 were the defendants 1 to 8 in the said suit. Appellants in the connected RFA No.2006/2007 were defendants 9 to 12 in the said suit. First respondent in both these appeals was the plaintiff in the said suit bearing O.S.No.10041/1990. The suit filed by the first respondent-plaintiff has been decreed directing the appellants in both these appeals i.e., defendants 1 to 12 to pay in all a sum of Rs.10,62,157-55/- with future interest at the rate of 17.5% p.a. on the said amount 7 from the date of suit till realization along with costs. The learned Judge has directed that the defendants therein are jointly and severally liable to pay the amount. The costs of Rs.25,000/- is also to be paid by the defendants to the plaintiff. It is this judgment and decree dated 30.05.2007 which is called in question on various grounds. Parties will be referred to as the plaintiff and defendants 1 to 12 as per their ranking in the Trial Court.
3. Fifth defendant is a partnership firm and defendants 7 and 8 viz., Prakash Shinde and Venkatesh M.Shinde, are stated to be the partners of the said partnership firm. First defendant Mr.A.S.Muktedar, was stated to be an agent of the fifth defendant-firm. The said first defendant Muktedar is stated to have purchased two demand drafts on 20.05.1988 for a sum of Rs.5 lakhs each from the plaintiff-branch and those demand drafts were favouring Excise Commissioner for 8 Karnataka. They were purchased by the first defendant on behalf of the fifth defendant for the purpose of participating in the excise auction proposed to be held during the month of May. The first defendant had no individual transaction or independent dealing to pay any amount to the Excise Commissioner relating to the proposed auction. The first defendant is stated to have purchased the two demand drafts as an agent of the fifth defendant.
4. On 09.06.1998, sixth defendant wrote a letter to the plaintiff-Bank informing that the two drafts purchased by him on 20.05.1988 for Rs.5 lakhs each were lost and hence, he had requested to stop payments. First defendant also wrote to the plaintiff- bank on 14.07.1988 about the loss of the Drafts and requested to issue duplicate drafts for the likesum. After obtaining a letter of indemnity, plaintiff issued duplicate drafts for Rs.5 lakhs each on 15.07.1988. 9 Defendants 1 to 4 had by a separate Indemnity letter, agreed to indemnify the bank of any loss that may be caused to it in the event of those lost original demand drafts were to be presented and encashed by anybody. It is further averred that the first defendant made a request to cancel the lost drafts and issue two duplicate drafts for Rs.5 lakhs each favouring Raghavendra Contractors, Raichur. The original demand drafts purchased by the first defendant on behalf of defendants 5 to 8 were presented for payment by the Excise Commissioner for Karnataka, Bangalore, towards the bid amount payable by defendants 9 to 12 and the proceeds of the two original drafts were collected. Due to the payment made by the plaintiff-Bank in respect of two original demand drafts stated to have been lost by the fifth defendant and two duplicate demand drafts obtained by them in lieu of the two lost original demand drafts, loss was caused to the extent of Rs.10 lakhs to 10 the plaintiff-bank. According to them all the defendants had colluded with each other to make false representation deliberately with the sole intention of defrauding plaintiff-bank for issuance of duplicate drafts, though the two original demand drafts obtained on 20.05.1988 were not really lost. The plaintiff-bank had an obligation to pay the amount towards the original drafts but not towards the duplicate drafts obtained by the first defendant on behalf of the defendants 5 to 8 on misrepresentation. The plaintiff got issued a legal notice on 20.11.1989 and defendants 1 to 8 had sent an untenable reply. Hence plaintiff had claimed a sum of Rs.10,62,157-55/- with interest at 17.5% p.a. on the said amount from the date of suit till realization along with cost.
5. Defendants 1 to 8 chose to file a joint written statement admitting the purchase of two demand drafts of Rs.5 lakhs each on 20.05.1988 vide 11 D.D.Nos.TL/AB/212391 and TL/AB/212392 respectively, but it is averred that the said demand drafts were not purchased on behalf of defendants 6 to 8, but were purchased by the fifth defendant from the plaintiff favouring the Excise Commissioner, Karnataka, as they were intending to deposit the same with the Excise Commissioner to participate in the excise auction to be held in the month of May/June 1988. It is averred that the two demand drafts were somehow lost even before holding the excise auction and immediately on coming to know of the loss, fifth defendant informed the plaintiff about the loss and requested not to make payment, in the event of those two original demand drafts being presented by anybody to it for payment. In this regard, fifth defendant is said to have informed the Excise Commissioner not to accept the two original demand drafts in the event of being presented to them. On two demand drafts being lost 12 and not being traceable, fifth defendant approached the plaintiff and sought for cancellation of the demand drafts so lost and made a request to issue duplicate demand drafts. After being satisfied about the loss of original demand drafts plaintiff issued the duplicate drafts.
6. According to defendants 1 to 8, 9th defendant appears to have made use of the two lost demand drafts for the purpose of making payment towards his bid in the excise auction held by the Excise Commissioner. Defendant No.9 is said to have been illegally derived the benefit under the two demand drafts which had been lost and which had been cancelled by the plaintiff. Defendants 7 and 8 are not stated to be partners of the fifth defendant-firm and that they were not in any way concerned with the purchase of the said two demand drafts. It is averred that if the defendants 9 to 12 had any monetary transaction with them on the basis of 13 some alleged promissory notes to an extent of Rs.18 lakhs, they should have filed separate suit for recovery of money and could not have used the two lost demand drafts. The averment that first defendant had no individual transaction or independent dealings with the Excise Commissioner has been admitted. Since the said two demand drafts were duly cancelled by the plaintiff- Bank, defendants 1 to 5 and its partners are stated to be not liable to pay any amount, is the averment.
7. The averment that sixth defendant as the partner of M/s.Aashirvad Enterprises, wrote a letter to the plaintiff-bank about the loss of two demand drafts is admitted. Letter addressed by the first defendant on 14.07.1988 to the plaintiff is also admitted. Request made by the first defendant for issue of duplicate drafts for the likesum is also admitted. Issuance of two duplicate drafts on 15.07.1988 favouring Excise Commissioner Karnataka is also admitted. Plaintiff is 14 stated to be negligent in having made payment on the cancelled demand drafts even after intimating to stop payment of two original demand drafts. Hence they had averred that no liability could be fastened on them. According to them, defendants 9 to 12 are responsible to indemnify the bank as they are the beneficiaries under the two lost demand drafts. With these averments, they had requested the Court to dismiss the suit as against defendants 1 to 8.
8. Defendant No.9 alone chose to file a written statement denying all the allegations made against him. According to defendant No.9, V.V.Seshadri had no authority to verify the plaint or institute the suit on behalf of the bank. According to the 9th defendant, Bank had no justification to issue duplicate demand drafts in the place of two original demand drafts on the ground of them being lost by defendant No.5. The plaintiff-bank could not have issued duplicate demand 15 drafts on the so-called letter of indemnity from persons who were totally strangers. According to defendant No.9, some Officers of the plaintiff-bank had colluded with defendants 7and 8 in playing fraud on defendant No.9 and eventually succeeding in defrauding the bank. According to defendant No.9, defendants 7 and 8 all along knew drafts were never lost and defendants 7 and 8 never cared to report the alleged lost under their signatures and did not take any responsibility on themselves to reimburse the bank in the event of original drafts being encashed. According to the 9th defendant, no letter of indemnity was taken from the fifth defendant, as the two original demand drafts were stated to have been purchased by the first defendant on behalf of the fifth defendant-partnership firm. It is very curious to note that the first defendant was never called upon to execute an indemnity bond though he had originally purchased the two demand drafts. 16
9. According to the 9th defendant, defendants 7 and 8, had availed loan from him to an extent of Rs.18 lakhs on different dates by executing separate promissory notes. Defendant No.9 had demanded them to return the amount by obtaining two drafts i.e, one draft for Rs.5 lakhs and another draft for Rs.3 lakhs and yet another draft for Rs.5 lakhs and thus on his instance, they were obtained in the name of Excise Commissioner. These drafts include the two original drafts stated to have been lost by defendants 6 and 7. The promissory notes were returned to defendants 5 and 6 after entering due discharge endorsement and as such, defendants 6 and 7 are lawful custodians of those 'on demand promissory notes'. All other allegations are specifically denied calling upon them to prove the same. With these pleadings he had prayed to dismiss the suit.
10. On the basis of the above pleadings, following 22 issues came to be framed:
17
1. Whether Plaintiff proves that the person verifying the plaint has authority to do so and it is properly framed?
2. Whether the plaintiff proves that the defendant No.1 as an agent of the defendant No.5 to 8 purchased two DDs bearing No.TL/AB/212391 and TL/AB 212392 on 20.5.88 for a sum of Rs.5,00,000/- each from it in favour of the Excise Commissioner for Karnataka in Bangalore?
3. Whether the plaintiff proves that while purchasing the aforesaid two DDs the deft No.1 represented the said DDs are required for the deft No.5 and he has purchased the same for and on behalf of the deft No. 5 and as such the same is binding on the 5th defendant and its all the partners?
4. Whether the plaintiff proves that on 9.6.88 the deft No. 6 as partner of the deft No. 5 addressed a letter to it stating that the aforesaid two DDs purchased by them were lost and to stop the payment?18
5. Whether the plaintiff proves that the deft No. 1 also addressed a letter to it on 14.7.88 about the loss of that DDs and requested for issue of duplicate DDs for the like sum?
6. Whether the plaintiff further proves that after taking the letter of indemnity from the defts 1 to 4 it has issued duplicate DDs for a sum of Rs.10,00,000/- on 15.7.88 ?
7. Whether the plaintiff proves that on 15.7.88 the deft No.1 as a agent of the defts 5 to 8 got the duplicate DDs for two Rs.5,00,000/- DDs each cancelled and purchased the fresh DD for Rs.10,00,000/- in favour of Raghavendra contracts, Raichur in lieu of the duplicate DDs and same has been paid?
8. Whether the plaintiff proves that the deft No. 6 by mis-representation and fraud over it obtained the said duplicate DD for Rs.10,00,000/- which was not be honoured and payable in view of the fact that the original DDs were already paid once and honoured by it?
9. Whether the plaintiff proves that the aforesaid original two DDs for a sum of Rs.5,00,000/- each 19 purchased by the defts No.1 and 5 to 8 which were stated to be lost were presented for payment by the Excise Commissioner for Karnataka, Bangalore towards the bid amount payable by the defts 9 to 12 respectively and the proceeds of the original DDs have been collected by the Excise Commissioner, for Karnataka, in Bangalore on 28.6.88 and 25.10.1988 respectively?
10. Whether the plaintiff proves that the presentation of the aforesaid duplicate DD and subsequent collection of the amount under the original DDs by the defts are illegal and unjustifiable?
11. Whether the plaintiff proves that the defts 9 to 12 have been collected the said amount and being the beneficiaries there on are also liable to pay the suit claim of the plaintiff?
12. Whether the plaintiff proves that on account of the encashment of the original DDs which were stated to be lost which in additional to the amount paid by canceling the duplicate DDs it has accrued a loss of Rs.10,00,000/- and as such all the defts are jointly and severally liable to make good the loss incurred by it?20
13. Whether the plaintiff proves that the defts are liable to pay interest at the rate of 17.5% p.a compounded quarterly on Rs.10,00,000/- from the date of encashment as prayed?
14. Whether the deft No.9 proves that the remedy of the plaintiff are barred by acceptance abandonment acquiescence, waiver and estoppel?
15. Whether the deft No.9 proves that the deft No.6 had no right or authority or locus-standi in any capacity either as an individual or as a partner of the deft No.5 either to report the so called loss of DDs or to stop payment thereof?
16. Whether the deft No.9 proves that the letter of indemnity is ineffective and unenforceable as alleged?
17. Whether the suit is bad for non-joinder of the necessary party?
18. Whether the valuation of the suit for the purpose of court fee is improper?21
19. Whether the suit is barred by law of limitation as alleged in para No.10 of the W/s of deft No.9?
20. Whether the plaintiff is entitled to recover a sum of Rs.10,62,157.55 together with future interest at the rate 17.5% p.a. compounded quarterly from the defts jointly and severally from the date of suit till its realization?
21. To what reliefs the parties are entitled to?
22. What Decree or Order?
11. On behalf of the plaintiff-Branch M.M.Lalu, who was the Assistant General Manager, in the local Head Office of S.B.I. came to be examined as PW1 and he has relied upon 21 exhibits. Defendant No.9 himself has been examined as DW1. No evidence is adduced on behalf of defendants 1 to 8 though common written judgment had been filed on their behalf.
22
12. After appreciating the evidence placed on record and hearing the arguments, the learned Judge has chosen to answer issue Nos.1 to 13 and 20 in the affirmative and remaining issues in the negative. Consequently suit is decreed as prayed for, directing the defendants 1 to 12 jointly and severally liable to pay a sum of Rs.10,62,157.55 with future interest at the rate of 17.5% p.a. from the date of suit till realization along with costs of Rs.25,000/-.
13. Several grounds have been urged in RFA No.2518/2007 filed by defendants 1 to 8. It is contended that the Trial Court has not properly analysed the evidence placed on record in right perspective and that a wrong approach to the real state of affairs has been adopted. It is contended that separate opportunities should have been given to the defendants who are adversaries and that the Trial 23 Court has failed to consider the rules of adversaries while recording evidence. It is contended that the Trial court did not give adequate opportunity to these appellants to lead their evidence and opportunity should have been given after defendants 9 to 12 closed their evidence by examining DW1. It is further contended that mere reiteration of the contents of the plaint by PW1 would not give any credence to the case of the Bank. Ex.P2 letter written by first defendant about the loss of two demand drafts has been ignored and that plaintiff was not diligent in handling this issue. It is further contended that the plaintiff could not have made any payment on the cancelled instruments and therefore, appellants are not liable. It is contended that the judgment of the Trial Court is opposed to law, facts and probabilities. 24
14. In the connected appeal filed by defendants 9 to 12 in RFA No.2006/2007, several grounds have been urged. It is contended that the plaintiff has examined only one witness and does not whisper about the fact of collusion in his chief-examination. It is further contended that when PW1 has specifically admitted in his cross-examination that defendants 9 to 12 did not have any transactions with other parties to the suit, the Trial Court has wrongly come to a conclusion that these appellants have colluded with the remaining appellants i.e., defendants 1 to 8 and that there is no acceptable evidence to that effect. The judgment of the Trial Court is stated to be based on conjectures and surmises so far as defendants 9 to 12, is one another ground. The suit against defendants 9 to 12 is not at all maintainable, as they were only holders in due course having taken two demand drafts in question bona fide and for value. 25 The defence taken up on behalf of defendant No.9 has virtually been ignored and thus the Trial Court has adopted a wrong approach to the real state of affairs, is one more ground. Hence it is prayed to allow the appeal RFA No.2006/2007 in its entirety and dismiss the suit as against defendants 9 to 12.
15. We have heard the arguments for the learned Counsel appearing for the parties. The learned Counsel for the parties in RFA No.2518/2007 has concentrated more on the quantum of interest awarded by the Trial Court than the liability fastened to the defendants 1 to 8.
16. We have heard the learned Counsel appearing for the appellants in RFA No.2006/2007. He has vehemently contended that the Trial Court could not have decreed the suit against defendants 9 to 12, more so, when their defence is altogether 26 different. After having heard the learned counsel and perusing the records, the following points arise for our consideration:
1. Whether the Trial Court is justified in decreeing the suit against all the defendants?
2. Whether the rate of interest awarded by the Court is justified? If not what should be the proper rate of interest?
3. Whether any interference is called for by this Court and if so, to what extent?
17. PW1 was the Assistant General Manager of local Head Office, State Bank of India, St.Mark's Road, Bangalore. He was working as an Accountant in the plaintiff-Bank during the period from 01.06.1987 to 30.07.1988 and it was during this period that the 27 first defendant purchased two demand drafts bearing Nos.TI/AB/ 212391 and TI/AB/212392 for Rs.5 lakhs each from the plaintiff-Branch at Sadashivanagar, on 20.05.1988. The purchasing of these drafts is not in dispute. Fifth defendant is a partnership firm for which defendants 6 and 7 are partners and there is no serious dispute about this fact. According to defendants 1 to 8 the demand drafts so purchased by the first defendant on behalf of the fifth defendant-firm was lost and the matter was intimated to the plaintiff-Bank.
18. We have perused Ex.P1 a letter addressed by Aashirwad Enterprises, fifth defendant partnership firm on 09.06.1988 to the Manager of plaintiff-Branch stating that the two demand drafts bearing Nos.TL/AB 212391 and 212392 had been lost. Hence, a request had been made to inform the matter to all 28 the branches of SBI at Bangalore and to hold up the original Demand Drafts if presented for collection and to inform him about the same. Mr.Gopal-sixth defendant wrote a letter as a partner of the said firm.
19. Later on, first defendant Mr.Muktedar, wrote a letter on 14.07.1988 to the plaintiff-branch that the two demand drafts purchased by him on 20.05.1988 from the plaintiff-branch had been lost and hence he had requested to issue duplicate drafts on the strength on the indemnity bond duly signed by three guarantors.
20. Ex.P3 is the indemnity bond executed by V.V.Raman, Mr.B.Bommaiah and Mr.Narasimaiah, i.e., defendants 2, 3 and 4 respectively. We do not know whether defendants 2, 3 and 4 were the partners of fifth defendant-firm. We also do not know as to why these defendants 2 to 4 had to execute an 29 indemnity bond to the plaintiff-bank, if they had no connection whatsoever in regard to the purchase of two demand drafts for Rs.5 lakhs each on 20.05.1988. It is curious to note that Ex.P3 is also signed by first defendant-Muktedar representing Aashirvad Enterprises.
21. Ex.P5 is a letter dated 15.07.1998 stated to have been addressed by Muktedar-first defendant to the Plaintiff-branch to cancel the enclosed draft issued to him and issue a fresh draft for Rs.10 lakhs favouring Raghavendra Contractors, Raichur on Raichur Branch of SBI. It is evident from this letter that first defendant representing defendants 2 to 8 had requested the plaintiff-branch to issue one demand draft for Rs.10 lakhs as he had furnished the two duplicate demand drafts. Nothing is placed on record as to why a separate DD for Rs.10 lakhs was to 30 be purchased by the first defendant and who had authorized him to do so.
22. On a plain reading of Exs.P3 and P4 which is identical to Ex.P3, it is evident that an indemnity bond was given by defendants 1 to 4 on behalf of defendant No.5 undertaking to indemnify the bank of loss that could have been caused in the event of two original demand drafts being presented by anybody. Therefore they cannot turn around and say that they will not be liable to pay the amount in case the two demand drafts were to be presented and encashed.
23. After intimating the plaintiff-branch on 09.06.1988 vide Ex.P1 that the two demand drafts had been lost and to stop payment on the same, a notice was got issued vide Ex.P6 on 15.07.1988 by the 9th defendant addressed to the plaintiff and defendants 7 and 8-Prakash Shinde and Venkatesh 31 Shinde, stating that they had executed separate promissory notes for Rs.3 lakhs, Rs.5 lakhs and Rs.5 lakhs respectively on 03.09.1987 by receiving the said amount mentioned in the promissory notes. Though this they had been called upon to repay the amount by means of demand drafts favouring Excise Commissioner and to handover the same to him as an evidence of having discharged the debt. It is also forthcoming that the three demand drafts bearing Nos.T/L 205235, T/L 205234 and TL/AB 212392 for Rs.3 lakhs, Rs.5 lakhs and Rs.5 lakhs respectively were obtained by them and handed over to him, which were in turn given to Excise Commissioner, Karnataka. It is also mentioned that all the pronotes came to be returned after due discharge endorsement. It had been made clear that defendant No.9 was the real purchaser of those drafts as they were purchased 32 by defendants 6 and 7 on his behalf in lieu of repayment of debts by them.
24. On 19.09.1989 plaintiff-branch issued a notice to the fifth defendant as well as defendants 3 and 4 viz., Bommiah and Narasimhiah that bank would invoke letters of indemnity executed on 14.07.1988 in connection with obtaining two duplicate drafts for Rs.5 lakhs from it, since the original demand drafts had been honoured and thus, the bank had incurred a loss of Rs.10 lakhs. Hence, they were called upon to repay the amount. It is made clear in Ex.P9 that defendants 5, 6 and 7 cannot be held responsible as they had already intimated about the loss of those demand drafts. This letter marked as Ex.P9 is signed by defendant No.3-Bommaiah. Similar letters were addressed by the first defendant and defendants 2 and 4 also which are marked as Exs.P10 33 to P12. After the receipt of this notice, bank got issued a notice to all the parties inclusive of the first defendant to return the amount of Rs.10 lakhs. It is further mentioned there that defendants 9 to 12 were also responsible to repay the amount jointly, as they were beneficiaries under the two original demand drafts dated 20.05.1988.
25. A reply notice was got issued by defendants 1 to 8 on 18.12.1989 to the plaintiff-bank denying all the averments and once again stating that defendants 1 to 8 were not responsible for the loss of Rs.10 lakhs and that defendants 9 to 12 were the beneficiaries under the lost demand drafts about which intimation had already been given to the plaintiff-bank.
26. We have perused the evidence of PW1. Defendant No.9 has been able to cull out from his 34 mouth that defendants 9 to 13 were not known to the plaintiff-bank and that they had no financial transaction. It is curious to note that defendants 1 to 8, having taken many contentions, not only in the plaint but also in the reply notice, have not entered the witness box and have not even cross-examined PW-1 and DW-1. It can be said that the defence set up by defendants 1 to 8 in the form of written statement has remained only on record without being substantiated in any manner. It is curious to note that defendants 1 to 8 have filed a common written statement. If defendants 1 to 4 had no connection with the fifth defendant partnership-firm of which defendants 6 and 7 are partners and if eighth defendant is also not connected with the partnership- firm and the purchase of two demand drafts on 20.05.1988 they would not have filed a common written statement. Hence, an adverse inference will 35 have to be drawn against defendants 1 to 8 under Section 114(g) of the Evidence Act. This presumption can be drawn holding that either the defence of defendants 1 to 8 is false or they have purposefully not cross-examined PW1 or not let in evidence on their behalf because if they had done so, they would have been exposed. Hence liability fastened on defendants 1 to 8 cannot be found fault with.
27. Insofar as the defence of defendants 9 to 12 is concerned, it is to be seen that they have made their stand very clear long before the filing of the suit. On behalf of defendant No.9 his advocate Mr.Ullal had issued a notice on 15.07.1998 to the State Bank of Hyderabad, Lingarajapura, Bangalore, J.C.Road and Sadashiva Nagar and defendants 7 and 8 about the defendants 7 and 8 availing loan on the strength of three promissory notes to an extent of Rs.3 lakhs, 36 Rs.5 lakhs and Rs.5 lakhs respectively and on his instance, obtaining three separate demand drafts in favour of Excise Commissioner and handing over the same to him. Similar notice had been issued to the plaintiff-branch as well as defendants 7 and 8 about the loan availed by them and his insistence to return the same and having discharged the amount by purchasing demand drafts. The affidavit in lieu of examination-in-chief of DW-1 is nothing but a replica of the contents found in Exs.P6 and 7 copy of the legal notice got issued on 15.07.1988. The case of defendants gets further strengthened by means of a letter addressed on 19.09.1989 by plaintiff vide Ex.P8 to D2 to D4 about their intention to invoke the indemnity bond executed vide Exs.P3 and P4 on 14.07.1988 undertaking to bear all the loss that could be caused in the event of two original demand drafts being presented for enacashment and being encashed. 37 So this would in a way support the case of defendant No.9.
28. In fact defendant No.9 himself has stepped into the witness box in support of his case. The examination-in-chief is replica of the contents of the written statement. He has been cross-examined by the learned Counsel for the plaintiff. The counsel for the defendants 1 to 8 did not cross-examine him at all. Therefore his assertion that he had advanced loan to defendants 7 and 8 and on the basis of the promissory notes and they had discharged the loan of Rs.18 lakhs through different demand drafts cannot be found fault with. All the details of the loan availed, and demand drafts issued to him favouring Excise Commissioner are mentioned.
29. Suggestion put to him that defendants 7 and 8 had never executed any promissory note in his 38 favour has been specifically denied. Evidence in a civil case will have to be assessed on the basis of preponderance of probabilities. Taking into consideration that defendants 1 to 8 have not cross- examined PW1 or DW1 and taking into consideration that defendant No.9 himself has entered into the witness box and has made an honest effort to substantiate his case and in the light of no serious infirmities being culled out from his mouth while cross-examining him, we do not find any reason to fasten the liability on defendants 9 to 12.
30. Issue No.20 relates to the fastening of the liability on all the defendants jointly and severally. The learned Judge has not made specific discussion about this very important issue. It is true that defendants 1 to 8 having been able to substantiate their case just because two original demand drafts 39 dated 20.05.1988 were presented by the ninth defendant to the Excise Commissioner.
31. On going through the judgment, we are of the considered opinion that there is absolutely no discussion about the liability of defendants 9 to 12. Even the evidence of PW1 does not indict in unequivocal terms about the alleged collusion of defendants 9 to 12 with defendants 1 to 8. The entire focus of the examination-in-chief of PW1 is about the role of defendants 1 to 8 in obtaining two duplicate demand drafts by furnishing indemnity bonds vide Exs.P3 and P4 and later on taking up untenable contentions. It is not forthcoming in the evidence of PW1 as to how defendants 9 to 12 are jointly and severally liable to pay the same.
32. In fact DW1 has volunteered to state that he does not have promissory notes because they have 40 been returned to defendants 7 and 8 after entering due discharge endorsements. Suggestion put to him that he has cheated the plaintiff-bank in collusion with other defendants to an extent of Rs.10 lakhs has also been specifically denied. It is specifically stated that he did not part with any money in purchasing two demand drafts involved in the present case. That is substantiated by his evidence in the examination- in-chief that defendants 7 and 8 owed him money and therefore at his instance they purchased demand drafts favouring Excise Commissioner and gave it to him. Defendants 1 to 8 have purposefully avoided entering witness box to state as to how the original DDs were with the 9th defendant. In the light of the defence setup by the 9th defendant and his evidence, the case of 9th defendant appears to be highly probable.
41
33. Taking overall circumstances of the case, we are of the considered opinion that the Trial Court is not justified in decreeing the suit against defendants 1 to 8. We do not find any reason insofar as fastening liability on defendants 9 to 12. Hence we answer point No.1 in the partly in the affirmative and partly in the negative.
Point No.2:
34. This issue deals with the rate of interest to be awarded. Learned Judge has awarded interest at the rate of 17.5% p.a. on Rs.10,62,157.55. This interest is applicable as future interest from the date of suit till realization along with costs of Rs.25,000/-. The loss suffered by the bank will have to be suitably compensated in terms of damages by awarding interest. Admittedly plaintiff is a nationalized bank. It accepts various kinds of deposits from the customers 42 and awards interest. The maximum rate of interest that could be awarded on different kinds of deposits could be the basis for awarding reasonable rate of interest. During 1988 and 1989 if a person were to invest money in Indira Vikas Patra or National Savings Certificate, it would have doubled within 5½ years. Normally any amount deposited in fixed deposits for a period exceeding five years would get doubled in 5½ - 6 years.
35. Proviso to sub-section (1) of Section 34 of The Code of Civil Procedure, states 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 per cent per annum, but shall not exceed contractual rate of interest or where there is no contractual rate, the rate at which moneys are lent or advanced by nationalized banks in 43 relation to commercial transactions. This would also give an indication that the rate of interest could be somewhere between 18% to 20% p.a. In fact the learned Judge has awarded 17.5% p.a. and that appears to be most reasonable. Hence, we do not find any reason to interfere with the discretion exercised regarding the rate of interest awarded by the learned Judge. Hence we answer point No.2 in the affirmative. Point No.3
36. In view of our findings on point nos.1 and 2, appeal filed by defendants 1 to 8 in RFA No.2518/2007 is liable to be dismissed with costs payable to the plaintiff-bank. Appeal filed by defendants 9 to 12 in RFA No.2006/2007 is to be allowed and the judgment and decree passed against defendants 9 to 12 in O.S.No.10041/1990 will have to be setaside with costs on defendants 1 to 8 i.e., 44 appellants in RFA No.2518/2007. Consequently suit against defendant Nos.9 to 12 stands dismissed. Registry to draw modified decree.
37. The original of this judgment shall be kept in RFA No.2518/2007 and a copy of the same in RFA No.2006/2007.
Sd/-
JUDGE Sd/-
JUDGE JT/-