Bangalore District Court
Canara Bank A Body Corporate ... vs M/S Asha Motors on 8 April, 2022
1
Com.O.S.No.569/2021
In the Court of LXXXIV Addl. City Civil & Sessions
Judge (CCH-85) (Commercial Court), Bengaluru
Dated this the 8th day of April 2022
Present: Smt.H.R.Radha B.A.L., LL.M.
LXXXIV Addl. City Civil and Sessions Judge,
(CCH-85 Commercial Court) Bengaluru
Com.O.S.No.569/2021
Plaintiff: Canara Bank a body corporate constituted
under the Banking companies Regulation
(Acquisition and transfer of undertaking) Act,
1970 having its Head Office at No.112,
J.C.Road, Bangalore and Branch Office at
Rajarajeshwary Nagara, Bangalore,
represented by its Officer and Power of
Attorney Holder Mr. Raghu Varman S.
(By Sri.K.Vijendra Rao, Advocate)
Vs
Defendants: 1. M/s Asha Motors, No.256/19, Papaiah
Layout, Rajarajeshwary Nagara, Bangalore -
98 by its Proprietor Mr.A.P.Ramesh
2. B.N.Sreedhar S/o B.R.Narayan R/o No.126,
2nd Cross, Sai Lotus Layout, Channasandra,
R.R.Nagar, Bangalore - 98.
(By Sri.J.K.Lokesh Gowda, Advocate)
Date of Institution 31.08.2021
Nature of the suit Recovery of money
Date on which First Case
Management Hearing took 08.02.2022
place
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Com.O.S.No.569/2021
Date of Commencement
of recording of evidence 25.03.2022
Date on which judgment
pronounced 08.04.2022
Time taken for disposal YEARS MONTHS DAYS
1) Total duration 00 07 08
2) From the date of first
case management 00 01 30
hearing
LXXXIV Addl. City Civil & Sessions Judge
(CCH-85 Commercial Court) Bengaluru
JUDGMENT
This is a suit for recovery of Rs.12,61,050/- from the defendants together with interest at 14.25% p.a. compounded monthly and cost.
2. The plaintiff's case in brief is that the 1 st defendant applied for cash credit of Rs.2,00,000/- on 01.01.2008 to meet his business needs of running automobile servicing center. The same was sanctioned on 07.01.2008. The 1 st defendant furnished letter of proprietorship and submitted request letter of overdraft facility of Rs.2,00,000/- on the same day. On sanctioning the same he executed on demand 3 Com.O.S.No.569/2021 pronote dated 07.01.2008 for Rs.2,00,000/- agreeing to pay the entire amount with interest at 13.25% p.a., cash credit agreement hypothecating the raw materials as security. The 2nd defendant stood as the guarantor for this transaction by executing agreement of guarantee and guarantee covering letter dated 07.01.2008. On 07.01.2009, the 1 st defendant applied for renewal of over draft limit and on sanctioning the same by enhancing the limit of Rs.2,00,000/- till 07.01.2010, on earlier terms and conditions. The 2 nd defendant executed letter confirming that the guarantee already executed remains unaffected by the renewal of the limit. On 05.04.2010 the 1st defendant once again sought for renewal of over draft limit of Rs.2,00,000/- and it was renewed till 07.04.2011. On 02.08.2011 the 1 st defendant submitted application seeking enhancement of OD limit by another Rs.1,00,000/-. By sanction memorandum dated 02.08.2011 the limit was enhanced to Rs.3,00,000/- on the original sanction terms and the limit was enable till 07.04.2012. The 1st defendant executed on demand pronote dated 02.08.2011 for the enhanced limit of Rs.3,00,000/- and the 2nd defendant as the guarantor executed letter to confirm that his guarantee continues to be binding on him for the enhanced limit. At the request of the 1 st defendant 4 Com.O.S.No.569/2021 the existing limit of Rs.3,00,000/- was renewed and made tenable till 07.04.2013 by sanction memorandum dated 26.04.2012 and the 2 nd defendant once again confirmed that his guarantee remains unaffected by the renewal of limit. Likewise on 27.03.2014, 22.06.2015, the OD facility was renewed for Rs.4,50,000/- and Rs.5,00,000/- respectively. On both occasion the 1 st defendant executed on demand pronote dated 03.04.2014 and 22.06.2015. He also executed supplemental agreement dated 22.06.2015. The 2nd defendant executed fresh guarantee covering letter dated 03.04.2014 stating that he is bound for total limit of Rs.4,50,000/-. On 05.04.2010, 02.08.2011, 08.07.2013, 22.06.2015, 01.01.2018 and 16.12.2020 the 1 st defendant executed letter of revival acknowledging the liability but, failed to service the interest payable to the OD account, to submit the stock statements, even after fully utilizing the limits. Since there was no cash flow to the account, it became over due and a non performing asset. The outstanding amount payable by the 1 st defendant is Rs.12,61,050/-. The 2nd defendant being the guarantor is liable to discharge the same.
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Com.O.S.No.569/2021
3. The defendants have filed common written statement admitting that the 1st defendant applied for credit facility of Rs.2,00,000/- in 2006 to run his business and deny all other transactions with the bank and contend that the suit is not maintainable. It is filed to harass them. At the time of availing Rs.2,00,000/-, the bank obtained their signatures on blank forms without disclosing the contents. The 1st defendant has regularly repaying the monthly installments towards the loan of Rs.2,00,000/- and he is not due any amount. The plaintiff has not managed proper account and the claim is exaggerated. They are not liable to pay any interest as claimed.
4. Based on the above, this court has framed the following ISSUES
1. Whether the plaintiff proves that the 1st defendant executed on demand pronote, cash credit agreement and supplemental agreement in respect of the OD facility dated 07.01.2008 till 22.06.2015?
2. Whether the plaintiff proves that the 1st defendant executed AOD/ letter of renewal dated 05.04.2010, 02.08.2011, 08.07.2013, 22.06.2015, 01.01.2018 and 16.12.2020?
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Com.O.S.No.569/2021
3. Whether the plaintiff proves that the 2nd defendant stood as the guarantor for the 1st defendant's loan?
4. Whether the defendants prove that their signatures was obtained on blank forms, at the time of availing the loan on 07.01.2008?
5. Whether the defendants prove that they have completely repaid the loan to the plaintiff?
6. Whether the plaintiff is entitled for Rs.12,61,050/- from the defendants together with interest as prayed?
7. What Order or Decree?
5. The Officer of the plaintiff bank has filed affidavit in lieu of examination in chief, examined himself as Pw1 and got marked Ex.P1 to P38. The defendants have not chosen to cross examine him or to enter the witness box or to adduce documentary evidence to substantiate their defense.
6. Heard the arguments of the learned counsel for the plaintiff. The defendants have failed to address arguments.
7. My findings on the above issues are:
Issue No.1: In the affirmative Issue No.2: In the affirmative 7 Com.O.S.No.569/2021 Issue No.3: Partly in the affirmative Issue No.4: In the negative Issue No.5: In the negative Issue No.6: Partly in the affirmative Issue No.7: As per the final order for following REASONS
8. Issues 1 to 5: Since inter related these issues are taken up together for discussion for the sake of convenience and to avoid repetition.
9. Ex.P38 is the authorization issued in favour of Pw1 to give evidence in this case and he has filed affidavit stating that the 1st defendant, a proprietary concern represented by its Proprietor A.P.Ramesh and carrying on business of running automobile servicing center availed cash credit facility from 01.07.2008 to 22.06.2015 by submitting applications and also executed necessary documents including pronotes.
10. Ex.P1, P3, P8, P10, P13, P17 and P20, P24, P25 are the loan application and request for OD facility/renewal of the OD facility submitted by the 1st defendant on 01-01-2008, 07-01-2008, 07-09-2009, 05-04-2010, 02-08-2011, 26-04- 2012 and 03-04-2014 respectively. Ex.P2, P11, P12, P16, 8 Com.O.S.No.569/2021 P19, P28 go to show that the loan was sanctioned by the plaintiff on 07-01-2008, 05-04-2010, 02-08-2011, 26-04- 2012, 27-03-2014 and 22-06-2015 respectively.
11. On sanctioning the first loan, the 1 st defendant, as seen from Ex.P4 and P5 has executed pronote for Rs.2,00,000/- and a cash credit agreement on 07-01-2018. After the limit was enhanced, he has executed pronote for Rs.1,00,000/- and a supplemental agreement on 02-08-2011 as per Ex.P14 and P15. On renewing the OD facility in the year 2014, the 1st defendant has executed supplemental agreement dated 03-04-2014 as per Ex.P21, link letter of for enhancement of credit facility at Ex.P25, pronote for Rs.1,50,000/- at Ex.P26. Likewise, on 22-06-2015 he has executed another pronote for Rs.50000/- and supplemental agreement as per Ex.P30 and P29 respectively.
12. Pw1 states that the 2nd defendant stood as the guarantor for the above transactions of the 1 st defendant by executing guarantee covering agreement and also confirmed that the guarantee agreement would be binding on him for the enhanced limits from time to time upto the limit of Rs.4,50,000/-, by way of guarantee covering letter. Ex.P6 and P7 are the guarantee agreement and guarantee 9 Com.O.S.No.569/2021 covering letter dated 07-01-2008 in respect of the 1 st transaction.
13. Ex.P18 is the 2nd defendant's letter dated 26-04-2012 agreeing that the guarantee executed earlier shall not be affected by the reason of additional and fresh documents obtained from the borrower upon renewal of the financial accommodation and undertaking that his liability is limited to Rs.3,00,000/- with interest at 13.25% p.a. Ex.P22 and P23 are the guarantee agreement and the guarantee covering letter executed by the 2nd defendant on 03-04-2014 limiting his liability to the extent of Rs.4,50,000/- only in respect of the loans/overdrafts/bills or otherwise in respect of the 1 st defendant's transaction with the bank. But the 2 nd defendant has not executed any guarantee covering letter in respect of the 1st defendant's OD facility dated 22-06- 2015.
14. Pw1 also states that the 1st defendant fully utilized the limits, executed revival letters dated 05.04.2020, 02.08.2011, 08.07.2013, 22.06.2015, 01.01.2018 and 16.12.2020 at Ex.P31 to P36 but failed to service the interest payable in the OD account. Therefore, there was no cash flow and the account became a non performing asset. 10
Com.O.S.No.569/2021
15. The defendants 1 and 2 admit only the first loan transaction and the documents at Ex.P1 to P7 all dated 07- 01-2008 but deny the remaining transactions contending that the plaintiff bank obtained their signatures on blank forms without informing about the contents. Yet, they have not cross examined Pw1 to discredit him with regard to execution of remaining documents or availment of loan by the 1st defendant.
16. The defendants have not even entered the witness box or produced documentary evidence to substantiate their defence that the loan amount has been repaid by the 1st defendant. Therefore, in the absence of contest by the defendants I do not have any reason to disbelieve the case of the plaintiff that on the 1st defendant availing OD facility and enhancement of the limit at his request from time to time, the defendants executed the above documents. Therefore, issues 1 and 2 are answered in the affirmative, issue No.3 partly in the affirmative and issues 4 and 5 in the negative.
17. Issue No.6: It is not the case of the plaintiff that the 2 nd defendant executed any guarantee covering letter or guarantee agreement in respect of the 1 st defendant's OD 11 Com.O.S.No.569/2021 facility of Rs.5,00,000/- dated 22-06-2015. As discussed earlier, by Ex.P22 and P23 dated 03-04-2014 the 2 nd defendant had limited his liability to Rs.4,50,000/-. The letters of revival at Ex.P33 to P36 are executed by the 1 st defendant alone.
18. As per Section 133 of the Indian Contract Act, any variance made without the surety's consent, in the terms of the contract between the principal debtor and the creditor, discharges the surety as to transactions subsequent to the variance. U/s 129 of the Indian Contract Act a guarantee which extends to a series of transactions is called a continuing guarantee.
19. Ex.P22, the guarantee agreement dated 03-04-2014 contains a clause whereby the guarantor authorizes the borrower to act as his agent to give acknowledgment of liability in respect of the general balance due under the said agreement from time to time and that he would be bound by such acknowledgment of liability. But the same cannot be extended to the subsequent enhancement of credit facility by Ex.P28 of the year 2015. The guarantee agreements executed by the 2nd defendant thus cannot be extended to the time barred debts by bringing the same 12 Com.O.S.No.569/2021 within the purview of continuing guarantee. For these reasons, I am of the opinion that acknowledgment of debt at Ex.P33 to P36 can bind only the 1 st defendant.
20. The correctness of entries in Ex.P37, certified statement of accounts extract, has remained unchallenged. If at all the 1st defendant had not renewed the OD facility from time to time as contended, there was no need for him to make cash deposits on 31-10-2015, 02-11-2015, 29-12- 2015, 29-02-201, 02-03-2016, 31-03-2016 29-04-2016 and 08-11-2016 as reflected in the statement of accounts extract. Therefore, the issue for consideration is answered partly in the affirmative holding that the plaintiff is entitled to recover Rs.12,61,050/- with current and future interest at 10% p.a., from the 1st defendant and the suit against the 2nd defendant is liable to be dismissed.
21. Issue No.7: In the result, I pass the following ORDER Suit of the plaintiff is decreed in part with cost.
The plaintiff is entitled to Rs.12,61,050/- with current and future 13 Com.O.S.No.569/2021 interest at 10% p.a. from the 1st defendant.
Suit against the 2nd defendant is dismissed.
Draw decree accordingly.
Issue copy of the judgment to the parties through e-mail as provided U/o XX Rule 1 of CPC if mail ID is furnished. (Dictated to the stenographer, transcribed and typed by her, corrected and then pronounced by me in the open court on this the 8th day of April 2022) (H.R.Radha) LXXXIV Addl.City Civil and Sessions Judge, (CCH-85 Commercial Court) Bengaluru ANNEXURE List of witnesses examined for the Plaintiff:
Pw1 Raghu Varman List of documents marked for the plaintiff:
Ex.P1 Loan application dated 01.01.2018 Ex.P2 Sanction memorandum dated 07.01.2008 Ex.P3 Request for OD facility dated 07.01.2008 Ex.P4 Pronote dated 07.01.2008 Ex.P5 Cash credit agreement dated 07.01.2008 14 Com.O.S.No.569/2021 Ex.P6 Guarantee agreement dated 07.01.2008 Ex.P7 Guarantee covering letter dated 07.01.2008 Ex.P8 Letter of renewal dated 07.01.2009.
Ex.P9 Letter for renewal dated 07.01.2009.
Ex.P10 Letter of renewal dated 05.04.2010.
Ex.P11 Sanction memorandum dated 05.04.2010.
Ex.P12 Sanction memorandum dated 02.08.2011.
Ex.P13 1st defendant's letter of renewal dated 02.08.2011 Ex.P14 Pro note by the 1st defendant dated 02.08.2011 Ex.P15 Supplemental agreement dated 02.08.2011 Ex.P16 Sanction memorandum dated 26.04.2012 Ex.P17 1st defendant's letter of renewal dated 26.04.2012 Ex.P18 2nd defendant's letter of renewal dated 26.04.2012 Ex.P19 Sanction memorandum dated 27.03.2014 Ex.P20 1st defendant's request for OD facility dated 03.04.2014 Ex.P21 Supplemental agreement dated 03.04.2014 executed by the 1st defendant Ex.P22 Guarantee agreement dated 03.04.2014 executed by the 2nd defendant Ex.P23 Guarantee covering letter dated 03.04.2014 executed by the 2nd defendant Ex.P24 1st defendant's letter of renewal dated 03.04.2014 Ex.P25 Link letter for enhancement of credit facility dated 03.04.2014 Ex.P26 Pro note dated 03.04.2014 executed by 1st defendant Ex.P27 1st defendant's letter of renewal dated
22.06.2015 15 Com.O.S.No.569/2021 Ex.P28 Sanction memorandum dated 22.06.2015 Ex.P29 Supplement agreement executed by the 1st defendant on 22.06.2015 Ex.P30 Pro note dated 22.06.2015 executed by 1st defendant Ex.P31 1st defendant's letter of revival dated 05.04.2010 Ex.P32 1st defendant's letter of revival dated 02.08.2011 Ex.P33 1st defendant's letter of revival dated 08.07.2013 Ex.P34 1st defendant's letter of revival dated 22.06.2015 Ex.P35 1st defendant's letter of revival dated 01.01.2018 Ex.P36 1st defendant's letter of revival dated 16.12.2020 Ex.P37 Certified statement of the 1st defendant's loan account extract with certificate under the Bankers Book Evidence Act Ex.P38 Authorization letter.
List of witnesses examined for the defendants: NIL List of documents marked for the defendants: NIL (H.R.Radha) LXXXIV Addl.City Civil and Sessions Judge, (CCH-85 Commercial Court) Bengaluru.