Karnataka High Court
Canara Bank vs Vara Trading Co. And Ors. on 19 October, 2005
Equivalent citations: AIR2006KANT88, I(2007)BC541, [2006]133COMPCAS482(KAR), ILR2006KAR130, 2006(4)KARLJ239
Author: V. Gopala Gowda
Bench: V. Gopala Gowda, Ashok B. Hinchigeri
JUDGMENT V. Gopala Gowda, J.
1. This Regular First Appeal is filed by the plaintiff-Bank questioning the correctness of the Judgment and Decree dated 11-9-1998 in OS 3469/90 passed by the 16th Additional City Civil Judge, Bangalore in dismissing the original suit with costs and sought for setting aside the same and prayed to pass Judgment and Decree as prayed in the suit, urging various legal contentions.
2. The rank of the parties is referred to in this Judgment as per their ranking before the Trial Court for the sake of convenience.
3. The plaintiff filed suit against the defendants to recover a sum of Rs. 3,68,951,30 together with interest at 19.5% p.a. compounded quarterly from the date of suit till the date of realization by sale of the schedule property belonging to the second and third defendants which is mortgaged in favour of Bank and further if, sale proceeds are found to be insufficient then, the decree against the defendants to recover the same personally from them by stating various facts in the plaint.
4. The case of the Bank is that, the first defendant is a proprietary concern of the second defendant. Third defendant is the wife of second defendant. 4th defendant is co-obligant. First defendant represented by second defendant approached the plaintiff-bank and sought for financial assistance of over-draft facility of Rs. 20,000/- from the Bank by signing the application on 1 -9-1982 which facility was later enhanced to Rs. 75,000/- on 18-1-1983. Defendants 1,2 and 4 executed a demand promissory note in favour of the Bank for a sum of Rs.75,000 promising to repay the amount to it with interest at 7.5% per annum above the RBI rate with a minimum of 17.5% per annum compounded quarterly for having availed over-draft facility from the plaintiff-bank. The first defendant also offered immovable property i.e. a plot bearing No. 13 situated in Sy.No. 35 of Poornapura village measuring 97'x45.5' belonging to second and third defendants as collateral security for the loan amount borrowed by first defendant through second defendant, thereby mortgaged the suit property as equitable mortgage in favour of the bank by deposit of title deeds. It is stated in the plaint that, first defendant availed the said credit facility for the purpose of its granite business. It is further stated by the plaintiff that defendants 1 and 2 have confirmed the liability by executing acknowledgement of debt on 6.7.1984, 29.1.1987 and 25.1.1990 as per Ex.P4, P5 and P6 respectively. It is the case of the bank that defendants are due in a sum of Rs. 1,80,5 86.60 as per the Ledger Extract produced as per Ex.P7 before the Court, wherein the payment made by the second defendant is debited to the account of defendants No. 1 and 2 from 30-1 -1987 upto the date of institution of suit. Interest amount accrued on the principal amount is to the extent of Rs. 1,88,365.60. Thus, the plaintiff-Bank claimed that defendants are liable to pay to it a sum of Rs. 3,68,951.30. Since the defendants did not repay the loan amount, the bank filed suit for recovery of the aforesaid sum from the defendants with interest as agreed.
5. After service of summons defendants 1 to 3 appeared and contested the claim. Summons to 4th defendant could not be served as he is expired. The plaintiff-Bank failed to bring his legal representatives on record before the trial Court. Hence, the suit against 4th defendant was abated and consequently it came to be dismissed against him.
6. Defendants 1 to 3 filed written statement admitting their relationship. They also admitted that the defendants No. 1 and 2 availed over-draft facility of Rs. 75,000/- from the plaintiff-bank during the year 1982-83. However, they denied the averment of the plaintiff that they executed 'On demand promissory note' dated 18-1-1983 promising to pay interest at 17.5% p.a. compounded quarterly. It is their case that there was neither agreement to pay interest or interest to be compounded quarterly. Hence, they contended that compounding of interest is illegal and unauthorized.
7. It is specifically contended by the defendants in the written statement that the Bank had taken their signatures on blank sheets and on various blank forms. While they signed on the said papers and forms, the same were not duly filled up by the bank. They also denied that the first defendant offered the schedule property as a collateral security towards loan availed by defendants No. 1 and 2 and thereby second and third defendants have created an equitable mortgage in respect of the suit schedule property by deposit of title deeds in favour of the bank. It is their further case that, with a view to clear of the loan amount they requested the Manager of the Bank to waive the interest amount and grant them the maximum concession for which they are entitled to enable them to clear off their entire liability.
8. It is further stated by the defendants in their written statement that, first defendant which is dealing in granite business of export and import has contracted with Y.N. International Limited, Tokyo, Japan for supply of 25 cubic meters of granite by agreement dated 6-1-1984 for a total sum of 11250 US dollars. The letter of credit dated 31-7-1984 for US $ of 11250 was sent to the plaintiff bank on 10-8-1984. The time limit was extended to 8-11 -1984, 15-2-1985 and 27-3-1985 and the final validity of letter of credit was extended to 1-5-1985. The first defendant transported the entire goods to Mangalore Port to export the granite. When the first defendant requested the bank on 12-4-1985 to hand over the letter of credit, the bank informed that they have not received the letter of credit. Since the first defendant did not get the letter of credit from the bank, it could not shift the consignment either on 1 -5-1985 or on the extended dates and thereby suffered a loss of 2 lakhs of rupees, due to the negligence of the bank. Further the defendants have stated that the suit is barred by limitation and therefore prayed for dismissal of the original suit on this ground alone. They further pleaded that they are not in a position to clear the suit claim in one lumpsum and that after giving set off for liquidated damages of 2 lakhs of rupees, prayed that installments be granted to pay the balance loan amount due to the Bank. The plaintiff-bank considered the first defendant concern as a sick unit. In that regard the plaintiff bank requested the defendants to submit sick unit form supplied by it on 4-10-1985 which was submitted on 7-10-1985, The defendants opposed the case of the plaintiff-bank and prayed for dismissal of the suit.
9. On the basis of pleadings, the Trial Court framed the following 8 issues and one additional issue for its determination.
1. Whether the plaintiff proves the defendants 1, 2 and 4 have executed the promissory note dated 18-1-1983 as alleged, if so what is the rate of interest payable?
2. Whether the defendants prove they are entitled to set off as claimed?
3. What is the amount due to the plaintiff which of the defendant is liable to pay the suit claim?
4. Whether the plaintiff proves the suit schedule property is mortgaged in his favour?
5. Whether the plaintiff is entitled to recover the amount by the sale of the suit schedule property?
6. Whether the suit is in time?
7. What decree or order?
8. Do the defendants prove defendant No. 1 is a sick unit? Additional Issue:
9. Whether the plaintiff proves that the defendants have executed acknowledements of debts on 6-7-1984, 29-1-1987 and 25-1-1990?
10. The case went for trial. On behalf of plaintiff-bank, four officers were examined as PWs 1 to 4 and marked 7 documents as Ex.P1 to P7. On defendants' side, the second defendant has been examined as DW1 and marked ten documents as Exs. D1 to D10.
11. The Trial Court, on appreciation of pleadings and evidence on record has answered all the issues in the negative except Issue No. 3, on which it is held that dues of the defendants are not established and consequently dismissed the suit.
12. The correctness of the findings and reasons recorded in the impugned Judgment is questioned in this appeal by the bank contending that the findings recorded on contentious issues are erroneous in law as the Trial Court, having regard to the undisputed fact that defendants 1 and 2 have availed over draft facility from the Bank and executed the promissory note and acknowledgements of debt Ex.P4, P5 and P6 and the credit entries made in the ledger extract produced as per Ex.P7, are not properly appreciated and considered by the Trial Court while answering the contentious Issue No. 1 and Additional Issue No. 9. Therefore, it is urged by the learned Counsel Mr. Urval N. Ramanand on behalf of the bank that the findings recorded on the said contentious issues by the Trial Court are erroneous in law. Further it is contended that the Trial Court has committed an error by answering the said issues against the plaintiff-bank holding that defendants have not executed the promissory note and acknowledgements of debt as pleaded by the plaintiff-Bank without taking into consideration the documentary evidences Exs.P1, 4,5 and 6. Though defendants 1 and 2 admitted the availment of overdraft facility from the bank, merely because they have stated that the signatures were obtained on the blank papers and forms without filling up the same though the burden of proof shifted upon them to prove the above contention, the same has not been discharged as required under Section 102 of the Indian Evidence Act. Further, he has contended that having regard to the admissions made by defendants 1 and 2 regarding execution of promissory note vide Ex.P 1, acknowledgements of debt vide Ex.P4, P5, and P6, the presumption is in favour of bank as provided under Section 118 of Negotiable Instruments Act, 1881. No rebuttal evidence is adduced by the defendants in this regard. Therefore, he has contended that the findings recorded on the contentious Issues 1, 3,6 and Additional Issue No. 9 by the Trial Court are erroneous in law. Hence he has submitted that the same are liable to be set aside.
13. Lastly, it is contended by the Learned Counsel that the findings are recorded on Issue Nos. 4 and 5 by assigning irrelevant reasons by the Trial Court ignoring the deposit of title deeds of the plaint scheduled property by defendants 1 and 2 by executing the document Ex.P3 dated 1-9-1982 along with documents mentioned at Ex.P3(c) (d). Therefore, he has contended that the findings recorded on Issue No. 6 by the Trial Court holding that suit is barred by time is vitiated on account of error in law as execution of the documents Ex.P3(b) and (c) and deposit of title deeds of the suit schedule property is not disputed by the defendants No. 2 and 3 and raising of loan amount is also not disputed by them. Therefore, he has submitted that the Trial Court ought to have been held that there was an equitable mortgage of the suit schedule property to the Bank as collateral security towards the loan availed by the defendants No. 1 and 2 as per Ex.P3. Based on the said documents, the learned Counsel for the Bank submits that the limitation for institution of suit against the defendants for recovery of loan amount is 12 years as per Article 62 of the Limitation Act, 1963, from the date of money becomes due from the defendants. Non-consideration of this relevant provision of the Act while answering the Issue No. 6 by the Trial Court has rendered the Judgment vitiated on account illegality and also suffers from error in law and therefore, the same is liable to be set aside.
14. The learned Counsel for respondents 2 to 3 was absent at the time of hearing and even today also at the time of dictating this judgment he has remained absent.
15. We have perused the correctness of the findings and reasons recorded by the Trial Court in the impugned Judgment on the contentious issues with reference to the legal submissions made by Sri Urval N. Ramanand, Learned Counsel appearing for plaintiff-bank. For this purpose we have carefully scrutinized the documents produced by the parties before the Trial Court, which are available in the original record, to find out as to whether the impugned Judgment and Decree warrant interference in this appeal? After careful perusal of the findings and reasons recorded on the contentious issues by the Trial Court, we accept the correctness of the Judgment by concurring with the same and assigning the following additional reasons in support of the same:
16. We are in complete agreement with the conclusions arrived at by the learned Trial Judge and the findings recorded by him on all the contentious issues, except issue Nos. 2 and 8. It is the case of the plaintiff-bank that title deeds of suit schedule property are executed as per Ex.P3, P3(c) and P3(d) dated 1-9-1982 by the defendants No. 2 and 3. The title deeds are re-deposited by defendants No. 2 and 3 as equitable mortgage in respect of suit schedule property as collateral security for the loan amount sanctioned in favour of the defendant Nos. 1 and 2. As could be seen from the document Ex.P3, there is reference in the body of the said document in different ink that the first defendant Trading Co. had deposited the title deeds on 13-1-1979 for having availed OD facility amount in the plaintiff-bank, Shivajinagar Branch. The amount mentioned therein is 5 lakhs. The name of the first defendant in the said document is written in different 'ink' and handwriting, Ex.P3 is dated 1-9-1982. If, really the title deeds are re-deposited by defendants 2 and 3 to the Bank in respect of the suit schedule property as collateral security for OD facility availed as per Ex.Pl and P2 which are dated 18-1-1983, the re-deposit of title deeds must be subsequent to that date but not earlier to that date. Further in Ex.P3 the particulars of loan amount availed by OD facility, the rate of interest etc, should be mentioned, as the same constitutes an integral part of the transaction as observed by the Apex Court in the case reported in United Bank of India Limited v. M/s. Lekharam Son Aram and CO. and Ors. . Undisputedly the above important aspects are not mentioned therein and therefore the document cannot be construed as a valid letter of re-deposit of titled deeds of the schedule property as contended by the plaintiff-Bank. Further this document dated 1 -9-1982 is not at all referred to in Ex.P-2 dated 18-1-1983, in which the execution of promissory note as per Ex.P 1 by defendant No. 2 and other documents are clearly mentioned.
17. It is definite case of the Bank that overdraft facility of Rs. 75,000/- was availed by the second and third defendants as per Ex.P2 on 18-1-1983 and promissory note vide Ex.P1 was executed by both defendants 2 and 3. Ex.P3 the letter of re-deposit of title deeds dated 1-9-1982 evidences the fact of re-deposit of title deeds with the bank in respect of the plaint schedule property as collateral security. No proper explanation is forthcoming from the Bank as to why the said document was earlier to the period of OD facility given by the defendants No. 1 and 2. Therefore, we have held that it is too much on the part of the Bank to contend placing reliance upon Ex.P3 dated 1-9-1982, three month's earlier to availment of OD facility by the defendants No. 1 and 2, to contend that defendant Nos. 2 and 3 have authorized the back to re-deposit the title deeds for collateral security of loan amount availed by them in respect of the plaint schedule property. The said title deeds were already in their custody for the loan amount mentioned in the document dated 31-1-1979. As already stated supra, earlier date i.e. 31 -1 -1979 is in different ink.
18. The title deeds can be deposited either on the date of availment of loan or immediately earlier to the loan sanctioned to the defendants No. 1 and 2, as provided under Section 58(f) read with Section 54 of Transfer of Property Act, 1882. This document again, as already stated by us, is in two different handwritings and ink. The relevant dates of re-deposit of title deeds of the plaint schedule property in respect of loan availment vide Ex.P2, has no nexus to the transaction of loan amount by availing OD facility by defendants No. 1 and 2 at all. Therefore, the contention urged by the learned Counsel on behalf of the Bank that the limitation for institution of the suit is 12 years under Article 62 of the Limitation Act when debt becomes due, cannot be accepted by this Court as the same is wholly untenable in law. The plaintiff-Bank has failed to prove Ex.P2, P3(c) and (d) is the letter of re-deposit of title deeds in respect of loan availed as per Ex.P2 by defendants-2 and 3 as pleaded by the Bank.
19. No doubt, the above important aspects noticed by us are not minutely scrutinized by the Trial Court while assigning reasons in support of its conclusions on the contentious issues by dis-believing the case of the plaintiff-bank in this regard. However, it has come to the correct conclusions by answering the aforesaid contentious issues against the Bank. The reliance placed by the plaintiff bank to justify its claim against the defendants on the basis of acknowledgements of debt executed by defendant 2 as per Ex.P4, P5 and P6 dated 6-7-1984, 29-1-1987 and 25-1-1990 respectively is wholly untenable. No doubt, the Trial Court has referred to these documents while answering issue No. 6 and additional issue No. 9 to find out whether the suit instituted by the Bank is in time or not. The Trial Court has rightly recorded its findings with reasons holding that the said documents cannot be construed as acknowledgements of debt due to the Bank executed by defendant Nos. 2 and 3.
20. We have carefully perused the Acknowledgements Exs. P4, P5 and P6 with reference to legal submissions made on behalf of Bank to find out the correctness of the said findings recorded in the impugned judgment by the Trial Court. To find out the correctness of the findings, it is necessary to extract Section 18 of the Limitation Act. 1963 which reads thus:
18. Effect of acknowledgement in writing: (1) Where, before the expiration of the prescribed period for a suit or application in respect of such property or right has been made in writing signed by the party against whom such property or right is claim, or by any person through whom he derives his title or liability, a fresh period of limitation shall be computed from the time when the acknowledgement was so signed.
(Emphasis made by this Court)
21. The acknowledgements of debt produced in this case by the Bank are carefully scrutinized by us. Having regard to the finding recorded by the Trial Court on the contentious issues namely 1,3,6 and Additional Issue No. 9. Ex.Pl is the promissory note. It contains signature of one witness. His name is not clearly mentioned in the said document. The signatures of defendants 2 and 3 are found in the said document. Since they have denied the execution of promissory note as pleaded in the plaint, the initial burden is on the Bank to prove the same as required under Section 101 of the Evidence Act. The name of witness described in the said document is not clearly mentioned and it is also not known whether the said witness is examined or not and thereby the initial burden is not discharged by the Bank as the execution of this document is seriously disputed by the defendants No. 2 and 3. Merely because the signatures are there on this document, it does not amount to accepting the liability of the overdraft facility extended to them in view of the specific denial of execution of promissory note Ex.P1 and acknowledgements of debt Exs.P4 to P6.
22. The document Ex.P4 is in two handwritings. With regard to contents and the dates mentioned in this document, PW-4 M. V. Bhaskar is a witness examined in the case to prove this document. He has categorically admitted in his evidence that he has filled up this document with regard to the date and the amount of Rs. 75,000 both in figures and words and the rest of the writings in this document are made by the one Sri H. V. Suresh who was working with him in the branch at that time and he has not signed the document and Bank Manager has also not signed. Further he has stated that as per the instructions of Bank Manager, he has filled up the contents of Ex.P4; he has delivered Ex.P4 to him giving instructions that he shall take signatures of the party. He further stated that when Bank Manager delivered Ex.P4 to him, some of the entries in this document were already made by Suresh. He is not examined in the case, Ex.P4(a) is dated 6-7-1984. The document Ex.P5 is dated 29-1-1987 one of the witnesses of the Bank to the said document is one Abdul Rahim, the Manager of the Bank during the period from June 1986 till September 1988 who is examined as PW2. Upon this document, the signature of the second defendant is there but the signature of third defendant is not there. Once again this document discloses the fact that the amount mentioned in Figures and in Words are in different handwriting and ink. This fact is admitted by PW.2 in his cross-examination. The document Ex.P6 is dated 25-1-1990, which document was got marked through PW-3 T.M. Nematulla. According to him, the second defendant has executed the said document in his office at Infantry Road. He has further admitted in his cross-examination that the particulars like the amount, interest and date of execution of security documents are left blank in Ex.P6. He further admitted that the relevant columns regarding the date of document, the interest amount and the balance amount due from the debtors are kept blank. This document is very important and crucial in this case because, except mentioning the amount of overdraft and pronote dated 18-1-1983 for a sum of Rs. 75,000/- the acknowledgements of debt alleged to have executed by the defendant No. 2 does not reflect as also the actual amount due from the defendants to the Bank in connection with the Loan Transaction. Having regard to the pleading of defendants denying the execution of pronote and acknowledgements of debt by defendants 2 and 3 in respect of the debt due to the Bank as pleaded by the bank, the claim of the bank cannot be accepted as correct in the absence of non-mentioning of the amount due from the defendants as per Ex.P6.
23. As per Section 18 of the Limitation Act the limitation of 3 years starts from the date of signing the acknowledgement, hi view of the serious discrepancies found in the documents, the Trial Court came to the right conclusions and held that suit claim is barred by limitation by answering the issue No. 6 against the Bank. But, proper reasons are not assigned by it, while answering Issue No. 6. However, we have supplemented the reasons. Therefore, we hold that acknowledgements of debt referred to supra are not in conformity with the provisions of Section 18 of the Limitation Act. Hence the findings recorded on the contentious Additional Issue No. 9 against the Bank is legal and valid and do not call for interference by this Court.
24. The case of the Bank that defendants 2 and 3 also executed the acknowledgements of debt in respect of the loan amount due from the defendants No. 1 and 2 is factually not correct, which is evident from perusal of the original Ex.P4 to P6. These documents are signed by the second defendant. According to him, as pleaded in his written statement, his signatures were taken on the blank forms at the time of advancing the loan amount but not executed the same as acknowledgements of debt as pleaded by the Bank. Further, there is nothing on record to show that these acknowledgements of debt are executed either by the second defendant or defendants 3 and 4 towards the OD facility loan amount availed as asserted in the pleadings and in the evidence of the plaintiff. The learned Counsel appearing on behalf of plaintiff-Bank places strong reliance upon the admission of acknowledgements of debt executed by DW-1 in his cross-examination. This contention of the Learned Counsel for the Bank cannot be accepted by this Court for the reason that the acknowledgements of debt must be in writing as provided under Section 18 of the Limitation Act. Undisputedly when the defendants No. 3 and 4 have not executed acknowledgements of debt as could be seen from Ex.P4 to P6, how the suit could have been instituted by the plaintiff Bank against the defendants No. 3 and 4 is not forthcoming in this Appeal. The acknowledgement of debt as per Ex.P6 said to have been executed by defendant No. 2 towards the debt due to the Bank is produced in support of this plea. As we have already recorded a finding of fact on proper appreciation of documentary evidence that Ex.P6 is not the acknowledgement of debt due to the Bank as the same is not in terms of Section 18 of the Limitation Act and the document which is required to be reduced in writing as provided under Section 92 of the Indian Evidence Act, the documentary evidence must prevail over the oral evidence of DW-1 upon which reliance is placed by the plaintiffs counsel. Therefore, the contention urged in this regard by the plaintiffs counsel placing reliance upon that portion of the evidence elicited in the cross-examination of DW1 does not render any assistance to the plaintiffs case to annul the findings on contentious issue No. 6 and additional issue No. 9. Further, reliance placed upon the ledger extract Ex.P7 to show that there are debit entries upto 13-12-1989. The institution of suit is in the year 1990. The acknowledgements of debt executed by the defendants 2 to 4 is not established by the plaintiffs for the aforesaid reasons recorded by us. Therefore the above said document do not render any assistance to the case of the Bank.
25. In our considered view, the plea taken by the defendants in their written statement that their signatures have been obtained on certain blank papers and forms subsequently the same have been filled up to prefer claim by plaintiff, has to be accepted. Therefore, the findings and reasons recorded on the aforesaid contentious issued by the Trial Court can neither be termed as erroneous in law or suffer from error in law.
26. For the reasons stated supra, we have to record that the Bank officers are public servants. After nationalization of banks, the trust is reposed in them to achieve the laudable object of Bank Nationalization. The manner in which the concerned officers of the Bank maintained the documents in this case shows their negligence. The same is most unsatisfactory. From a perusal of the promissory note, acknowledgements of debt due and also the letter of deposit of title deeds, Exfacie, it is a clear case of fabrication of documents subsequent to lending the loan which conduct of the officers of bank is highly deplorable and same is deprecated. We are conscious about the fact that plaintiff-bank is a nationalised bank. The Nationalization of Private Banks was made by the Union of India with an avowed object to see that operation of economic system does not result in concentration of wealth in a few individual but to sub-serve the common good in the constitutional philosophy as enshrined in the Article 39(b) and (c) of Part-IV of Constitution of India. The amount of negligence on the part of concerned officers of the Bank during the relevant period of time when the loan amount was sanctioned is not ignorable. The bank has not managed its affairs and business properly, effectively and efficiently thereby huge amount of public money is wasted by its officers on account of their negligence and carelessness which aspect shall be borne in mind by the higher-ups of the Bank and give suitable directions to its officers for proper functioning.
27. The above observations are made by us keeping in view the non-recovery of lakhs of rupees lent to several private entrepreneurs which is one of the cause for non-implementation of bank nationalisation policy of the Union of India to achieve the laudable constitutional object to see that resources of the Nation are utilized properly to render economic justice to the poor and weaker sections of the Society.
28. Even after recording the findings of fact against the Bank by the Trial Court and dismissal of the suit, the plaintiff-bank has not stopped litigating the matter. It has filed appeal before this Court by paying huge Court fee of Rs. 73,335/- which is public money. The concerned officers who took decision to litigate the matter should have applied their mind seriously that every Pie of the Bank is public money and that it is not a fit case for preferring Appeal in view of the categorical findings recorded by the Trial Court. Before giving opinion to file this appeal by spending huge money, the Bank officers should have been more careful in scrutinizing the documents with reference to the findings and reasons recorded by the Trial Court and thereafter should have taken decision in the matter for filing this Appeal.
29. For the reasons stated supra, we do not find any good reason whatsoever to interfere with the judgment and decree challenged in this appeal. Though it is a fit case to impose exemplary cost payable by the persons who are responsible for taking decision for filing this appeal, we refrain from doing so as we are dismissing this appeal.
30. The appeal is accordingly dismissed.
31. The Registry is directed to send the copy of this Judgment to the Chairman-cum-Managing Director of the Bank for his perusal and to take corrective measures.