Bangalore District Court
Federal Bnk Limited vs Sri.Shantilal Kothari S/O on 26 March, 2018
IN THE COURT OF XV ADDITIONAL CITY CIVIL &
SESSIONS JUDGE AT BANGALORE CITY( CCH.No.3)
Dated this the 26th day of March, 2018
Present: Dr. A.GURUMURTHY, Ph.D
XV Additional City Civil & Sessions Judge,
Bangalore
O.S.No. 1163/2002
Plaintiff: Federal Bnk Limited, a
registered office at : Aluva,
Kerala-683101, represented by
its Senior Manager at its branch
No.11, 1st Cross Road,
Gandhinagar, Bangalore-
560009.
(By Sri.V.V.K, Advocate)
// VS //
Defendant: Sri.Shantilal Kothari S/o
Pukhraji Kothari, major,
H.No.17, 2 Floor, Sripuram 3rd
nd
Cross, Kumara Park West,
Bangalore-560020.
(By Sri. L.A.K, Advocate
Date of Institution of the
suit: 15/02/2002
Nature of the Suit (suit for Suit for recovery of money
pronote, Suit for
2 OS 1163/2002
declaration and
possession, Suit for
injunction, etc.):
Date of the 02/01/2007
commencement of
recording of the Evidence:
Date on which the 26/03/2018
Judgment was
pronounced:
Total duration: Year/s Month/s Day/s
16 01 11
JUDGMENT
Plaintiff bank has filed this suit to recover a sum of Rs.2,79,279.85 paise from the defendant with court cost and interest @ 18% per annum including penal interest @ 2% per annum from the date of suit till the date of realization.
2. Pleadings in brief:
It is the case of the plaintiff bank that defendant had availed OD facility from the plaintiff bank to the tune of Rs.3,00,000/- and at the time of availing the OD facility, defendant had executed agreement of pledge of stocks/shares/ debentures and other securities in dematerialized form, in 3 OS 1163/2002 favour of the plaintiff bank. On 13/3/2000, to avail OD facility upto Rs.3,00,000/- and he has also executed an On Demand Promissory Note for Rs.3,00,000/- on 16/3/2000 and also executed a security delivery letter coupled with covering letter on 16/3/2000. At the time of execution of suit documents, defendant has agreed to pay interest @ 16.32% per annum with quarterly rests and he has also agreed to pay penal interest @ 2.04% per annum in case of default. Based upon the request made by defendant, plaintiff bank has sanctioned OD facility to the defendant to the tune of Rs.3,00,000/- for a period of 12 months and at the time of availing the OD facility, defendant has pledged the shares owned by him, which were described in the suit schedule as a security to the loan liability. After availing the OD facility, defendant has confirmed the availment of OD facility. Defendant is under obligation to repay the loan, which he has availed under OD facility, but he has not repaid the loan to the plaintiff bank, which he has availed under the OD facility. As such, plaintiff bank has sold away the shares of defendant on 24/8/2001 and on 26/7/2001 and on 4/10/2010 and 4 OS 1163/2002 received Rs.26,156.15 paise and realized sale proceeds amount of Rs.26,156.15 has been credited to the loan account of the defendant and then informed the same to the defendant through letter dated 24/10/2001. On 9/3/2001, plaintiff bank has issued a legal notice, calling upon the defendant to clear of the loan liability. Inspite of it, the defendant has not cleared the loan liability. As on the date of filing the suit, defendant was in due of R.2,79,279.85 paise. Hence this suit to recover the said loan amount with court cost and interest.
3. In the initial stage, defendant has been placed exparte and after recording the oral evidence of the then manager of plaintiff bank, my learned predecessor has passed a judgment on 21/4/2007. Thereafter, defendant has filed a Misc.Case and on the basis of order passed on the Misc. Petition the case has been reopened and recorded the oral evidence of both side parties afresh. Soon after reopening the case, the defendant has filed written statement, wherein, it is contended that defendant is not aware of the averments made in para 2 of the plaint. However, it is admitted that defendant has requested 5 OS 1163/2002 the plaintiff bank to extend OD facility to him on the security of shares and denied averments made in para 3 of the plaint and contended that no consideration has been passed to the defendant under suit documents and he has never agreed to pay interest @ 16.32% per annum and he has not agreed to pay penal interest @ 2.4% per annum and he has admitted averments made in para 5 of the plaint and denied averments made in para 6, 7, 8, 9, 10 & 11 of the plaint and contended that plaintiffs are not entitle to recover the suit claim with interest as prayed in the plaint. It is alleged that plaintiff bank has not acted as per the instructions given by the defendant to sell his share and to adjust the sale proceeds to the loan account and there is a negligence on the part of plaintiff bank in not selling the shares of defendant, at the time when he has requested the plaintiff bank to sell away the same. It is further alleged that plaintiff bank has sold away the shares of the defendant at a lower rate and caused huge loss to the defendant and that loss was caused to the defendant only due to negligence on the part of plaintiff bank. The defendant has also denied averments made in para 12 and 13 of the plaint 6 OS 1163/2002 and contended that defendant is not in dispute of RS.2,79,279.85 paise to the plaintiff bank and the statement of account produced by the plaintiff bank is not correct and this defendant is not liable to pay the suit claim and interest thereto as prayed and prayed the court to dismiss the suit.
4. Based upon pleadings following issues were framed :
ISSUES
1) Whether plaintiff bank proves that defendant had availed overdraft loan facility to the tune of Rs.3,00,000/- from the plaintiff bank on 16/3/2000 against dematerialized shares mentioned in the suit schedule?
2) Whether plaintiff bank further proves that defendant has agreed to repay the loan amount with interest @ 16.32% per annum compounding quarterly and he was further agreed to pay penal interest @ 2.04% per annum, in case of default as alleged in para 4 of the plaint?
3) Whether plaintiff bank further proves that as on the date of filing the suit, defendant was in due of Rs.2,79,279.85?
4) Whether plaintiff bank is entitle to recover the suit claim with interest @ 18% per annum compounding quarterly?
5) What order or decree?
5. After framing of issues, present manager of the plaintiff bank has been examined as PW.1 and at his instance 15 documents were got marked as per Ex.P.1 to P.15 and closed 7 OS 1163/2002 plaintiff's side evidence. Thereafter, defendant has entered the witness box and he has been examined as DW.1 and at his instance 7 documents were got marked as per Ex.D.1 to D.7 and closed defendant side evidence.
6. Heard arguments.
7. Based upon pleadings, oral and documentary evidence placed on record, this court proceed to answer above issues as under:
Issue No.1 : In the affirmative.
Issue No.2 : In the affirmative.
Issue No.3 : In the affirmative.
Issue No.4 : Partly in the affirmative. Issue No.5 : As per final order for the following:
REASONS
8. ISSUES No.1 & 3 : These two issues are taken together for common discussion to avoid repetition and overlapping, since these two issues are intrinsically interrelated with each other.
8 OS 1163/2002
9. Perused the pleadings, oral and documentary evidence placed on record. Wherein, plaintiff bank has pleaded that in the year 2000, defendant has approached the plaintiff bank and requested the plaintiff bank to extend the OD facility to the tune of Rs.3,00,000/- and in that regard he has submitted an application on 13/3/2000. Considering the request of defendant, plaintiff bank has extended the OD facility to the defendant on 16/3/2000 to the tune of Rs.3,00,000/- for a period of 12 months and at the time of availing the OD facility, defendant has executed an On Demand Promissory Note, Security Delivery Letter and he has agreed to repay the loan with interest @ 16.32% per annum. It was further agreed to pay interest @ 2.4% per annum, in case of default. Thereafter, defendant has availed OD facility, but he has not repaid the loan amount to the plaintiff. As such, plaintiff bank has sold away the pledged shares of defendant on 24/8/2001, 26/7/2001 and on 4/10/2010 and credited the sale proceeds of Rs.26,156.15 to the loan account of the defendant and intimated the same to the defendant on 24/10/2001 and called upon the defendant to pay the 9 OS 1163/2002 balance loan amount. Inspite of receipt of legal notice, defendant did not cleared off the loan liability, as a consequence defendant become due of Rs.2,79,279.85 paise to the plaintiff bank. As such, plaintiff bank has filed this suit to recover the suit claim from the defendant with court costs and interest.
10. After registration of the suit, summons were issued to the defendant and in pursuance of the suit summons, defendant has not appeared before the court. As such, defendant has been placed exparte. After recording oral evidence of Branch Manager of the plaintiff bank, my learned predecessor in office has passed judgment (exparte). Thereafter, defendant has filed miscellaneous petition for reopening of the case and to permit him to participate in the proceedings. In pursuance of the orders passed in Misc. Petition, defendant has appeared before the court and he has filed written statement, wherein, defendant has denied the averments made in para 2 of the plaint and it is admitted that defendant has requested the plaintiff bank to extend the OD 10 OS 1163/2002 facility to the defendant, but in fact, no consideration has been passed to the defendant under the suit document and he has never agreed to pay interest @ 16.32% per annum and he has also not agreed to pay penal interest @ 2.4% per annum, as alleged in para 5 of the plaint and he has stoutly denied averments made in para 6, 7, 8, 9, 10 and 11 of the plaint and it is alleged that plaintiff bank has not acted his request to sell his pledged shares and to adjust the sale proceeds to his loan account. It is further alleged that there is a gross negligence on the part of plaintiff bank and it is further alleged that plaintiff bank has sold away the shares of defendant, after lapse of one year at a lesser rate and caused huge loss to the defendant. In view of the loss caused to the defendant, plaintiff bank is not entitle to recover the suit claim and prayed the court to dismiss the suit.
11. Keeping the rival contention of both side parties in mind, this court carefully scrutinized the oral and documentary evidence placed on record. It is observed that availment of OD facility to the tune of Rs.3,00,000/- from the 11 OS 1163/2002 plaintiff bank is not in dispute and the same has been categorically admitted by the defendant. Therefore, there is no need to discuss anything more on the point of availment of OD facility by the defendant from the plaintiff bank in the year 2000 and at the time of availing the OD facility, defendant has executed suit document, such as, agreement of pledge of stocks / shares / debentures and other securities held in dematerialized form as per Ex.P.1, as a security to the OD amount of Rs.3,00,000/- and at the time of availing the OD facility, defendant has agreed to pay interest @ 16.32% per annum compounding quarterly and he has further agreed to pay penal interest @ 2.4% per annum, in case of default, the same has been denied by the defendant at page 5 of Ex.P.1, the same has been clearly mentioned in the document and based upon information found in page 5 of Ex.P.1, this court has come to a conclusion that at the time of availing OD facility, defendant has agreed to pay interest @ 16.32% per annum with quarterly rests and he has agreed to pay penal interest @ 2.4% per annum. It is relevant to note that under Ex.P.1, defendant has pledged around 450 shares, which he 12 OS 1163/2002 has held in Global Tele Company, HCL, HP Company, Penta Media Company, Reliance Capital Company and Zee Tele Company and face value of those share was around Rs.4275/-. On 16/3/2000, defendant has executed an On Demand Promissory Note in favour of the plaintiff bank as an additional security to the OD facility as per Ex.P.2 and he has also executed security delivery letter in favour of plaintiff bank as per Ex.P.3. Apart from executing Irrevocable Power of Attorney as per Ex.P.4 and on the same day, defendant had executed a security delivery letter as per Ex.P.5 and one more promissory note for Rs.3,00,000/- as per Ex.P.6 and he has also executed an agreement as per Ex.P.7 undertaken to abide by the terms and conditions of the OD facility and creation of pledge of shares in favour of plaintiff bank in respect of shares mentioned in Ex.P.1. It is alleged that defendant has not repaid the loan amount as agreed, inspite of repeated requests and demands and issuance of legal notices.
13 OS 1163/2002
12. It is the case of the defendant that in the year 2000, he had written a letter to the plaintiff bank as per Ex.D.3 on 19/7/2000, requesting the Branch Manager of the Federal Bank, Gandhinagar Branch to sell away his shares, which he has pledged with the plaintiff bank and to credit the sale proceeds to his OD account.
13. It is further alleged that plaintiff bank has not sell away his pledged shares, soon after receiving letter of the defendant dated 19/7/2000 and there is an unreasonable delay on the part of plaintiff bank in selling away the shares of defendant. It is further contended that at the time when defendant has written letter to the plaintiff bank authorizing the plaintiff bank to sell away his shares held by defendant were fetching good market value. IN support of it, the defendant has produced the valuation Certificate issued by Bangalore Stock Exchange Limited and the same is marked at Ex.D.4. It is alleged that the plaintiff bank ha sold away his shares soon after receiving the letter from the defendant, the sale proceeds of pledged shares will be more than OD account 14 OS 1163/2002 balance. But in the instant case, plaintiff bank has sold away the share for a lesser rate i.e. after lapse of one year and credited very less amount to his OD account. Thereby, defendant has sustained huge loss. In view of huge loss suffered by him, defendant has prayed the court to dismiss the suit holding that there is a gross negligence on the part of the plaintiff bank for not selling away his shares, soon after receiving letter from him and bank has postponed the sale of shares for around one year. In the meanwhile, share value of his pledged share was so much diminished and at that time, the plaintiff bank has sold away his shares for a lesser price and credited that lesser sale proceeds to his OD account and prayed the court to dismiss the suit holding that defendant ha sustained huge loss, due to the negligent act of the plaintiff bank. In support of it, defendant has produced certificate issued by the Bangalore Stock Exchange Limited and the same is marked at Ex.D.4 and contended that the value of his shares pledged with the plaintiff bank were fetching market price of more than Rs.2,08,000/- in the month of September 2000, but those shares were sold for sum of Rs.26,156.15 15 OS 1163/2002 paise i.e. in the month of July, August & October 2001 i.e almost after completion of 8-10 months. As a result, defendant has suffered huge loss and such loss has been caused to the defendant only due to negligence on the part of plaintiff bank and prayed the court to dismiss the suit.
14. In the course of cross examination, plaintiff bank has conducted lengthy cross examination as to the genuineness of Ex.D.4 and it is brought to the notice of the court that Ex.D.4 is not a genuine document and the same is not certified by the Bangalore Stock Exchange Limited. It is firmly pleaded that Ex.D.4 is a created document and the same has not been obtained from the Bangalore Stock Exchange Limited in accordance with law and there is no document before the court to believe that defendant has paid required fee to obtain Ex.D.4. If defendant is really obtained Ex.D.4 from the Bangalore Stock Exchange Limited, defendant could have been produce the receipt to show that defendant has paid required fee to the Bangalore Stock Exchange Limited on 18/4/2001 and obtained Ex.D.4 in accordance with law. 16 OS 1163/2002 More so, Ex.D.4 is not bear the seal of the Bangalore Stock Exchange Limited. In view of the same, the learned counsel representing the plaintiff bank has prayed the court to hold that Ex.D.4 is a created document to enable the court to believe that in the year 2000 the market value of the pledged shares were more than Rs.2,00,000/-.
15. Learned counsel representing the defendant has argued that defendant has suffered huge loss due to negligence on the part of the plaintiff bank. If the Manager of the plaintiff bank has acted upon the request made by the defendant as per his letter dated 19/7/2000 (Ex.D.3), plaintiff bank could have been realize more than Rs.2,00,000/- out of the pledged shares of defendant, the plaintiff bank has not chosen to sell away the pledged share of defendant in the year 2000 in pursuance of the defendant's letter dated 19/7/2000. As a result, market value of the pledged shares of defendant were gradually diminished and at that time plaintiff bank has sold away the pledged shares of defendant at a lesser price and caused huge loss to the defendant and such loss has 17 OS 1163/2002 been caused to the defendant, only to the negligence on the part of plaintiff and prayed the court to dismiss the suit.
16. Keeping the rival contention of both side parties in mind, this court has carefully scrutinized the pleadings, oral and documentary evidence placed on record, it is observed that in the month of July 2000, defendant has written a letter to the plaintiff bank, requested the plaintiff bank to sell away the pledged shares of defendant as per Ex.D.3. Admission made by DW.1 makes it abundantly clear that defendant is residing near the plaintiff bank and he is carrying on his chemical business near to the plaintiff bank. In view of the same, defendant could have been often visited the plaintiff bank and he could have been personally visited the plaintiff bank often and requested the concerned Manager to sell away his pledged shares. Absolutely there is no evidence on record to believe that he has visited the then Manager of the plaintiff bank to sell away his pledged share in the month of July or in the month of August 2001. May be due to pressure of work, the then Manager of the plaintiff bank has not acted upon 18 OS 1163/2002 Ex.D.3. Of course, there is negligence on the part of the then Manager of the plaintiff bank, but the quantum of negligence on the part of the then Manager of the plaintiff bank cannot be quantified in the absence of required documentary evidence. Merely based upon Ex.D.4, this court cannot come to a conclusion that in the year 2000 value of the pledged shares of defendant was around Rs.2,08,000/-. More so, there is no counter claim. If the defendant has really suffered loss due to negligence on the part of the then Manager of the plaintiff bank, defendant could have been made counter claim quantifying the damages, which he has really suffered due to negligence on the part of plaintiff bank. In the absence of specific pleading regarding exact loss caused to the defendant. It is difficult to come to form any opinion as to the actual loss suffered by the defendant due to negligence on the part of plaintiff bank. Reserves a right to the defendant to claim damages/actual loss caused to the defendant, due to negligence on the part of plaintiff bank, this court has come to a conclusion that the defendant has availed OD facility from the plaintiff bank to the tune of 19 OS 1163/2002 Rs.3,00,000/- by pledging his shares, which were narrated in Ex.D.4 and he has not repaid OD loan balance in terms of agreement entered between the parties. On scrutiny of the oral evidence of PW.1 and Ex.P.1 to P.15, it is observed that on 16/3/2000, defendant has approached the plaintiff bank and requested the plaintiff bank to extend OD facility to the tune of Rs.3,00,000/- and in that regard defendant has executed an agreement of pledge of stocks/ shares/ debentures and other securities held in dematerialized form as per Ex.P.1 and he had availed OD facility to the tune of Rs.3,00,000/- and he has agreed to repay the loan amount with interest @ 16.32% per annum with quarterly rests and he has further agreed to pay penal interest @ 2.04% per annum, in case of default and it can be seen in page 5 of Ex.P.1 and at the time of availing OD facility, defendant has executed an On Demand Promissory Notes, security delivery letters, irrevocable power of attorney and creation of pledge of shares as a security to the OD facility as per Ex.P.2 to P.7. Thereafter, defendant has availed OD facility to the tune of Rs.3,00,000/- and he has not repaid that amount fully to the 20 OS 1163/2002 plaintiff bank except writing letter to the plaintiff bank on 19/7/2000 as per Ex.D.3, requesting the plaintiff bank to sell away his pledged shares and to appropriate the sale proceeds to his OD account and absolutely there is no evidence on record to believe that defendant has persuade the then Manager of the plaintiff bank to act upon his letter dated 19/7/2000 and to appropriate the sale proceeds to his OD account. As a result, defendant become due of R.26,105.85 paise to the plaintiff bank as on 24/10/2001. the time limit given to the OD facility is 12 months as per Ex.P.1, defendant has not repaid the OD loan account to the plaintiff bank within 12 months from the date of availment of OD facility. As such, plaintiff bank has got issued legal notice on 24/10/2001 as per Ex.P.11 and for which defendant has given reply as per Ex.P.13 and reiterated his stand. As on the date of filing the suit, defendant become due of Rs.2,79,279.85 paise including upto date interest and it can be seen in the ledger extract pertaining to OD loan account of the defendant and the same has been marked at Ex.P.15. 21 OS 1163/2002
17. Based upon oral evidence of PW.1 and admissions made by DW.1 and by virtue of Ex.P.1 to P.15, this court has come to a conclusion that the defendant has availed OD facility in the month of March 2000 to the tune of Rs.3,00,000/- and he has agreed to pay interest @ 16.32% per annum compounding quarterly and he has further agreed to pay penal interest @ 2.04% per annum, in case of default and at the time of availing the OD facility, defendant has executed an On Demand Promissory Notes, security delivery letters, irrevocable power of attorney, consideration receipt and creation of pledge of shares as per Ex.P.2 to P.7 as a security to the OD loan amount. Thereafter, defendant did not repaid the OD loan amount to the plaintiff bank in terms of agreement entered between the parties on 16/3/2000. It is most important to note that the time limit to repay the OD loan amount is 12 months from the date of availing OD facility. In the instant case, defendant has not cleared of the OD loan amount within 12 months from the date of availing OD facility. Thereby, defendant become due of Rs.2,79,279.85 paise as on the date of filing a suit as per 22 OS 1163/2002 Ex.P.15. Based upon oral evidence of PW.1 and Ex.P.1 to P.15, this court has come to a conclusion that plaintiff bank has proved that defendant has availed OD facility from the plaintiff bank to the tune of Rs.3,00,000/- on 16/3/2000 and at the time of availing the loan, defendant agreed to pay interest @ 16.32% per annum compounding quarterly and he has further agreed to pay penal interest @ 2.04% per annum, in case of default and the same has not been cleared by defendant. In view of the same, plaintiff bank is entitled to recover the OD loan balance of Rs.2,79,279.85 paise from the defendant. Accordingly, issues No.1 to 3 are answered in the affirmative.
18. ISSUE No.4 : Based upon answers to issues No.1 to 3 and by virtue of precise discussion held there under, this court is of the opinion that plaintiff is entitle to recover the loan amount with court costs and interest. Considering the facts and circumstances of the case, this court is of the opinion that defendant deserves some concession in the rate of interest payable on the OD loan balance, since he has 23 OS 1163/2002 suffered some loss in the sale of his pledged shares. Accordingly, this court proceed to answer issue No.4 partly in the affirmative.
19. ISSUE No.5 : Based upon answers to issues No.1 to 4 and for the reasons there under, this court proceed to pass the following:
ORDER Suit is decreed for Rs.2,79,279.85 paise with court cost and interest @ 8% per annum from the date of suit till the date of realization.
Defendant is directed to pay the decree amount within 3 months from the date of decree.
Draw decree accordingly.
(Dictated to Judgment Writer; transcript corrected, initialed and pronounced by me in open court on this the 26th day of March, 2018) (A.GURUMURTHY) XV Addl.City Civil & Sessions Judge, Bangalore.
ANNEXURE WITNESSES EXAMINED FOR THE PLAINTIFF BANK:
PW.1 : Mani John & Suresh Prabhu 24 OS 1163/2002 DOCUMENTS MARKED ON BEHALF OF PLAINTIFF BANK:
Ex.P.1 : Agreement of pledge of stocks, shares and other securities.
Ex.P.2 : On Demand Promissory Note dt. 16/3/2000. Ex.P.3 : Security Delivery Letter dt. 16/3/2000 Ex.P.4 : Irrevocable power of Attorney dt. 16/3/2000 Ex.P.5 : Security Delivery Letter dt. 16/3/2000 Ex.P.6 : Covering letter dt. 16/3/2000 Ex.P.7 : Letter of confirmation dt. 16/3/2000 Ex.p.8 : Notice by plaintiff to the defendant dt. 11/9/2000. Ex.P.9 & P.10: Postal Acknowledgements. Ex.P.11: Office copy of one more notice by plaintiff to the Ex.P.12: Postal Acknowledgement. Ex.P.13: Office copy of legal notice dt. 9/3/2001. Ex.P.14: Postal Acknowledgement. Ex.P.15: C.C of statement of Account.
WITNESSES EXAMINED FOR THE DEFENDANT:
DW.1 : Sri.Shanthilal Kothari.
DOCUMENTS MARKED ON BEHALF OF THE DEFENDANT:
Ex.D.1 : Letter written by defendant dt. 16/5/2000 Ex.D.2 : Postal Acknowledgement. Ex.D.3 : Copy of letter dated 19/7/2000 Ex.D.4 : Letter dt. 18/4/2001 by Bangalore Stock Exchange Ex.D.5 : Transaction Statement pertaining to D-MAT Account Ex.D.6 : Pledge Master Report issued by IL & FS Ex.D.7 : Statement of Account issued by plaintiff bank.
(A.GURUMURTHY) XV Addl.City Civil & Sessions Judge, Bangalore.25 OS 1163/2002
Judgment pronounced in open court. Vide separate order.
ORDER Suit is decreed for Rs.2,79,279.85 paise with court cost and interest @ 8% per annum from the date of suit till the date of realization.
Defendant is directed to pay the decree amount within 3 months from the date of decree.
Draw decree accordingly.
(A.GURUMURTHY) XV Addl.City Civil & Sessions Judge, Bangalore.