Punjab-Haryana High Court
State Bank Of India vs Depro Foods Ltd. And Ors. on 1 November, 1985
Equivalent citations: [1988]64COMPCAS831(P&H)
JUDGMENT Rajendra Nath Mittal, J.
1. This order will dispose of C. P. No. 69 of 1982 and C. P. No. 75 of 1982.
2. Briefly, the facts in C. P. No. 69 of 1982 are that the plaintiff is having a branch at G. T. Road, Bahalgarh, District Sonepat.
Mr. Surinder Kumar Kalia, branch manager of the plaintiff, was authorised to institute the present suit under statutory regulations 76 and 77 of the State Bank of India General Regulations, 1955 (hereinafter referred to as "the Regulations"). Defendant No. 1 was engaged in the business of manufacture and sale of food products at Rai in Haryana. It was ordered to be wound up by this court, vide order dated August 21, 1980. Defendants Nos. 2 to 7 were the directors of defendant No. 1 and along with defendant No. 8 its guarantors as well.
3. Defendant No. 1 approached the plaintiff for executing a deferred payment guarantee in the sum of Rs, 6,18,390 in favourof Messrs. Techno Exports of Sofia (Bulgaria) from whom the necessary plant and equipment was being imported by the said defendant for the setting up of a dehydration iactory at Rai. The plaintiff agreed to execute a deferred payment guarantee in favour of Messrs Techno Exports in the aforesaid sum. Defendants Nos. 2 to 6 became guarantors for payment of the said amount to the plaintiff. Defendants Nos. 5, 6 and 8 created equitable mortgages of the properties as follows :
Sl. No. Person who mortgaged the properties Properties mortgaged
1. Defendant No. 5
Plot situated in Mohalla Shahdana, Madhovan, Bareilly.
2. Defendant No. 6 Plot No. 10, Block G, situated in 35, Civil Lines, Ahara, Kothi Nawaleranpur, Bareilly.
3. Defendant No. 8 A plot of land measuring 711 sq. yards out of Khasra No. 504 situated in Mauza Pathanpura, Court Road, Saharanpur.
4. Defendant No. 1 executed two mortgage deeds dated October 6, 1972, andDecember 12, 1972, for Rs. 6,18,319 and Rs. 71, respectively), with respect to its properties in favour of the bank as detailed below:
Person who mortgaged the property Property mortgaged Defendant No. 1
(i) Manipulation and control conveyor belt.
(ii) Stripped conveyor.
(iii) Cubas cutting machine.
(iv) Apron drier.
(v) Onion crusher with a vibrating serve.
(vi) Electro magnetic catcher.
(vii) Vibrator.
(viii) Fan mill for dehydrated onion in powder;
complete with cyclones sieve dust catcher.
(ix) Sorting machine.
(x) Control switch boards.
(xi) Electromagnetic separators.
(xii) Spare parts.
Second Schedule
5. AH that the piece or parcel of land measuring 32 Kanals situated and lying at 20th Mile, G. T. Road, Rai, near Sonepet, together with factory building and bounded in the manner following, that is to say North : By land belonging to Chiranji Lal, Brahmin.
South : By land of Gram Panchayat.
East : G.T. Road, West : Land belonging to Kanwal Singh Tyagi.
The first two instalments of Rs. 62,328 and Rs. 67,116.55, respectively, which fell due on June 30, 1972, and June 30, 1973, from defendant No. 1 to Messrs Tehno Exports were paid by the New Delhi main branch to the plaintiff by debiting the said amount to the current account of defendant No. 1 in the said branch. Regarding the other four instalments which became due on June 30, 1974, June 30, 1975, June 30, 1976, and June 30, 1977 (both days inclusive), the New Delhi main branch of the plaintiff made payments to Messrs Techno Exports by debiting the respective amounts to its Bahalgarh branch which accordingly debited the said amount to defendant No. 1's cash credit limit account of Rs. 6 lakhs as follows:
Instalment due on Instalment amount plus Incidentals thereto Amount debited to defendant No. 1's account Rs.
30-6-1974 59,884.03 + 241.71 60,125.74 30-6-1975 58,661.90 + 246.65 58,908.55 30-6-1976 57,439.77 + 243.60 57,683.37 30-6-1977 56,217.65 + 100.00 56,317.65 Total 2,33,035.31
6. The New Delhi main branch of the bank paid the amount of Rs. 54,995.53 due on June 30, 1978, to Messrs Techno Exports. The said amount was debited by the branch to the protested bill account of defendant No. 1. In addition to that, an amount of Rs. 237.53 on account of incidental charges was debited to the said account of the defendant. According to the banking practice, the plaintiff does not charge interest in that account but recovers the same at a penal rate on the balances due.
7. The plaintiff gave cash credit (hypothecation) limit of Rs. 6,00,000 on February 26, 1972, to defendant No. 1. Defendants Nos. 2 and 3 stood guarantors for payment of the said amount. With effect from March 14, 1973, the limit of Rs. 6,00,000 was enhanced to Rs. 6,50,000.
Defendants Nos. 2 and 3 further became guarantors for the enhanced amount.
8. The plaintiff, at the request of defendant No. 1, granted to it a clean term loan of Rs. 5,00,000 on April 2, 1973. Defendant No. 1 executed a mortgage deed dated April 2, 1973, in favour of the plaintiff regarding the properties mentioned at page 3 of the judgment.
9. Defendant No. 1 again approached the plaintiff and requested for the enhancement in the limit of the cash credit (hypothecation) limit of Rs. 6,50,000 to Rs, 7,50,000. However, the plaintiff, instead of enhancing the aforesaid limit, granted to defendant No. 1 another cash credit (hypothecation) limit to the extent of Rs. 1,00,000. Defendant No. 2 became guarantor for payment of the amount found due in that account from the company.
10. The plaintiff gave another cash credit (hypothecation) limit of Rs. 7,50,000 at the request of defendant No. 1. Defendants Nos. 2, 4, 5 and 6 became guarantors for payment of the amount found due in the said account against defendant No. 1.
11. On December 13, 1976, the three aforesaid cash credit (hypothecation) limits were consolidated into one cash credit (hypothecation) limit of Rs. 15,00,000. Defendants Nos. 2, 4, 6 and 7 became guarantors for repayment of the amount found due from defendant No. 1 in the said consolidated account.
12. Between the period May 13, 1975, and April 28, 1976, the branch manager of the plaintiff gave to defendant No. 1 a cash credit facility of discounting inland bills thereunder. On presentation of the bills, the amount of each bill discounted was debited to inland bills account of defendant No. 1 and simultaneously the amount of the bills was credited to the cash credit account of the said defendant. During that period, defendant No. 1 raised 17 bills in the aggregate sum of Rs. 14,77,186.
13. Defendant No. 1 failed to deposit the aforesaid sum of Rs. 14,77,186 plus interest amounting to Rs. 3,50,117.10 accrued thereon to the plaintiff. Consequently, the amount of Rs. 18,77,303.10 was debited to the cash credit account of defendant No. 1 on December 8, 1976.
14. On December 31, 1976, the total amount which became due to the plaintiff from defendant No. 1 came to Rs. 48,17,008.92 (cash credit plus bill discounting Rs. 44,15,610'43 plus medium term loan of Rs. 4,01,398.49) and defendant No. 1 signed a balance confirmation slip in token of the correctness of the amount of Rs. 44,15,610.43.
15. On January 8, 1977, the plaintiff enhanced the limit to Rs. 45,00,000 on the ground thatan amount of Rs. 44,15,610.43 had become due from defendant No. 1 on all cash credit accounts plus bill discounting. Defendants Nos. 2 and 4 became guarantors for payment of the aforesaid amount.
16. On October 25, 1977, the plaintiff transferred the balance due and payable by defendant No. 1 on account of principal, interest and charges of Rs. 50,35,497.89 in the cash credit account (which included Rs. 2,33,035031 on account of deferred payment guarantee and Rs. 4,69,147.83 in medium term loan) to protested bills account. On January 7, 1978, defendant No. 1 signed balance confirmation slip of Rs. 55,04,645.72 due as on December 31, 1977.
17. Thereafter, recoveries to the tune of Rs. 79,225.85 were made from defendant No. 1. An amount of Rs. 55,233.03 was debited to the account of defendant No. 1 on September 12, 1978, on account of the seventh instalment of deferred payment guarantee. Thus, after giving credit of the amounts received from defendant No. 1 and debiting the amount of Rs. 55,233.03, an amount of Rs. 54,80,652 90 became due from defendant No. 1. An amount of Rs. 15,45,989'33 became due by way of interest from November 1, 1977, to July 8, 1979, a day prior to the date of institution of the suit. Thus, the total amount which was due on that day came to Rs. 70,26,642.23. Consequently, the plaintiff filed a suit for recovery of Rs. 70,26,642.23 with future interest at the rate of 15 per cent. per annum till the date of payment against defendants Nos. 1 to 7 jointly and severally and for recovery of Rs. 2,32,203.35 with future interest at the rate of 2 1/2 per cent. per annum till the date of recovery against defendant No. 8 by sale of the mortgaged/hypothecated property. A tabular form containing the particulars of the loan facilities is attached herewith as annexure " A ".
18. Now, I advert to the facts of C.P. No. 75 of 1982. The plaintiff, as already mentioned above, executed in favour of Messrs Techno Export a deferred payment guarantee for Rs. 6,18,390 with interest thereon at the rate of 2 1/2 per cent. to be calculated on the outstanding balances. The plaintiff paid a total amount of Rs. 6,18,390 to Messrs Techno Export in 11 instalments, i.e., on June 30, 1972, June 30, 1973, June 30, 1974, June 30, 1975, June 30, 1976, June 30, 1977, June 30, 1978, June 30, 1979, June 30, 1980, June 30, 1981, and June 30, 1982. Third to seventh instalments are included in C.P. No. 69 of 1982. Eighth instalment, ninth instalment, tenth instalment and 11th instalment were paid by the plaintiff to Messrs Techno Export after the institution of the above suit on June 30, 1979, June 30, 1980, June 31, 1981, and June 30, 1982. The said four instalments under the deferred payment guarantee were paid by the Overseas Branch, New Delhi, of the plaintiff bank by debiting the amount of each such instalment to the plaintiff's Bahal-garh Branch. The plaintiff's branch at Bahalgarh, accordingly, debited the amount of the said four instalments to the protested bill account No. 2 of defendant No. 1. The total amount of the aforesaid instalments is Rs. 2,08,616.90 (the eighth instalment Rs. 53,872.40, the ninth instalment Rs. 52,781.70, the tenth instalment Rs. 51,581.45 and the eleventh instalment Rs. 50,381.35). The plaintiff filed a suit for recovery of Rs. 2,08,616.90 with future interest at the rate of 19.5 per cent. per annum from the date of the suit till the date of payment by sale of the mortgaged/ hypothecated properties against the defendants. It is further prayed that in case the proceeds of the sale are insufficient to satisfy the decree, the plaintiff be held entitled to recover the balance amount by execution of the decree against the defendants.
19. The suits have been contested by all the defendants except defendant No. 7. In C.P. No. 69 of 1982, five written statements have been filed, the first on behalf of defendant No. 1, the second on behalf of defendants Nos. 2 and 4, the third on behalf of defendant No. 3, the fourth on behalf of defendant No. 6 and the fifth on behalf of defendant No. 8. Mr. Jaiswal made a statement on behalf of defendant No. 5, on January 12, 1984, that the said defendant did not want to file any written statement and adopted the written statement of defendant No. 6. Defendant No. 1 pleaded that none of the charges had been registered under Section 125 of the Companies Act with the Registrar of Companies, Delhi and Haryana. Defendants Nos. 2 and 4 took the pleas in the written statement that their signatures were obtained on blank forms. Consequently, they were not liable to pay the amount claimed. They also pleaded that Mr. S. K. Kalia was not authorised to file the suit and that the plaintiff had not complied with the provisions of Section 125 of the Companies Act with regard to registration of charges. Some other pleas were also taken which are reflected in the issues. Defendants Nos. 3, 6 and 8 have in their written statements taken similar pleas as have been taken by defendants Nos. 2 and 4. Defendant No. 8 took another plea that the amounts of the instalments relating to deferred payment guarantee account were transferred to the cash credit account of the company and, consequently, he stood discharged from payment of the amount. Both the suits were consolidated, vide order dated July 28, 1983.
20. Defendant No, 3 subsequently made an application for amendment of the written statement. He was allowed to amend the written statement and take the plea that the suit was bad for misjoinder of parties and causes of action.
21. On the pleadings of the parties, the following issues were framed:
1. Whether Mr. S.K. Kalia is authorised to file the present suit?
If not, with what effect ? OPP
2. Whether the plaintiff has complied with the provisions of Section 125 of the Companies Act with regard to registration of charges ? OPP
3. Whether the amount in suit is due from the defendants ? OPP
4. Whether the plaintiff is entitled to any interest. If so, at what rates ? OPP
5. Whether the plaintiff cannot file the present suit unless hypo thecated goods are sold ? OPP
6. Whether the plaintiff is responsible for closure of business of defendant No. 1 ? OPP
7. Whether Petition No. 75 of 1983 has become infructuous in view of para No. 1 of the preliminary objection? OPD
8. Whether, in view of the execution of the documents mentioned in para 18 of the plaint in C.P. No. 69 of 1982, the liability of defendants Nos. 3 and 5 to 8 to pay the amount in suit ceased to exist ? OPD-3 and 5 to 8 8A. Whether the suit is bad for misjoinder of parties and causes of action ? OPD-3
9. Relief.
22. Issue No. 1.--The petitioner is governed by the State Bank of India Act, 1955. Under Section 50(3) of the Act, regulations have been framed by the Reserve Bank of India known as the State Bank of India General Regulations, 1955. It is provided in regulation 77 that plaints, written statements, etc., may be signed and verified, and generally all other documents connected with legal proceedings whether contentious or non-contentious may be made and completed on behalf of the State Bank by the chairman or by any officer or employee empowered by or under regulation 76 to sign documents for and on behalf of the State Bank. Regulation 76 says that the vice-chairman, the managing directors, the deputy managing directors, the chief general managers and such other officers or employees of the State Bank as the Central Board or the executive committee may authorise in this behalf by notification in the Gazette of India are empowered to sign all documents, instruments, accounts, etc., connected with the current or authorised business of the State Bank. A notification dated August 26, 1972, was issued under regulation 76 authorising the agents of the bank to sign the documents. Subsequently, by notification dated August 26, 1972, the designation of agents has been changed to branch managers. Therefore, the branch managers are entitled to sign the plaints, etc., under regulation 77. It has been held by G. C. Mital J. in Stale Bank oj India v. Kashmir Art Printing Press, Sirsa [1981] PLR 300 ; [1983] 54 Comp Cas 56 that branch managers had the authority not only to sign the pleadings and verify them but also had the authority to sign vakalatnama to authorise an advocate to file the suit or to file the same themselves. It was further held that the larger authority granted to the branch managers to sign plaints, written statements, etc. should include the power to file suit, written statement, etc. The aforesaid view was followed by me in State Bank of India v. Haryana Rubber Industries (P.) Ltd. [1985] 2 PLR 8 ; [1986] 60 Comp Cas 472. It is not disputed that Mr. S.K. Kalia through whom the suit has been filed was working as branch manager. Consequently, I hold that he was authorised to file the suit.
23. Issue No. 2.--R. L. Aggarwal, U. D. C., Office of the Registrar of Companies, Delhi and Haryana, deposed that defendant No. 1 created the following charges on its assets in favour of the plaintiff :
Date of charge.
Date of receipt of Form '8' in the Office of the Registrar of Companies.
Amount of charge Whether the charge was registered or not 1 2 3 4 Rs.
23-6-1970 6,18,380 Registered 5-7-1971 1,00,000 Registered 26-2-1971 6,00,000 Registered 14-3-1973 12-4-1973 6,50,000 Unregistered 18-3-1974 2-4-1974 1,00,000 Unregistered 21-3-1975 18-4-1975 7,50,000 Unregistered 13-12-1976 22-12-1976 15,00,000 Unregistered 8-1-1977 21-1-1977 45,00,000 Unregistered
24. He further deposed that the Registrar of Companies wrote a letter to the bank on March 3, 1981, that since the company had gone into liquidation, the pending charges could not be registered. Prior to the said letter, no letter was written by the Registrar to the bank informing it that there was any defect in the application for registration in Form 8 of the charges. He also produced copies of the certificates of registration and agreements between the bank and the company in Form K and the particulars of the charge in Form 8 submitted by the bank in their office. The question now to be seen is that if the particulars of the charge in Form 8 have been submitted by the charge-holder to the Registrar and no defect is pointed out by him in the particulars, whether the charge is deemed to be registered, though it has not been in fact registered. It is not neces-
sary to elaborate on the point as a similar matter came up before me in Haryana Financial Corporation v. Depro Foods P. Ltd. (Company Petitions Nos. 34 and 35 of 1981 decided on December 3, 1981), and State Bank of India's case [1985] 2 PLR 8 ; [1986] 60 Comp Cas 472 wherein it was held that the Registrar is duty bound to convey the objections in the particulars of the charge to the charge-holder so that those can be removed by him. The duty of the charge-holder is to send the particulars of the charge in Form 8 along with relevant instrument and if the charge is not registered by the Registrar, then the former cannot be held responsible for that. The reason is that after the particulars, etc., have been filed by the charge-holder, he is absolved from his duty and the responsibility of registration shifts on to the Registrar. Consequently, I decide the matter in favour of the plaintaiff and hold that all the charges of the plaintiff shall be deemed to have been registered, though they have not in fact beeto registered.
25. Issues Nos, 3 and 8.--Both these issues are inter-connected and I propose to deal with them together. The bank gave to the company various loan facilities as mentioned in annexure "A" and got five types of documents executed from it and the guarantors. Those were agreements in Forms K & L, guarantee deeds in Form I (Spl), pronotes and mortgage deeds. Agreements in Form K were got executed from the company for hypothecation of its goods in favour of the bank and agreements in Form I for hypothecation of its debts and assets in favour of the bank. Agreements in Form I (Spl) were got executed from the guarantors for payment of the loans taken by the company. The pronotes were got executed from the company in favour of the guarantors. Thereafter, the bank got them endorsed from the guarantors in its favour. Thus, the company and the guarantors both became liable to pay back the loan taken by the company to the bank. The bank also obtained registered mortgage deeds from the company and equitable mortgages from some of the guarantors. The mortgage deeds were obtained in the case of two loans, namely, clear term loan of Rs. 5,00,000 and deferred payment guarantee as mentioned at serial Nos. 3 and 1, respectively, in annexure " A ". The equitable mortgages were obtained from defendants Nos. 5, 6 and 8 with regard to deferred payment guarantee.
26. With this background, I shall, in the first instance, deal with item No. 1 in annexure "A" which relates to deferred payment guarantee.
27. It is not disputed that the amount of Rs. 6,18,390 was paid by the bank to Techno Exports on behalf of the company as the price of the machinery in 11 instalments. It is also not disputed that the first two instalments paid by the bank to them have been received by it by debiting the amount to the current account of the company maintained in New Delhi branch of the bank. Thus, the dispute remains regarding the remaining nine instalments, out of which the five instalments, i.e., instalments Nos. 3 to 7, are the subject-matter of C.P. No. 69 of 1982 and the remaining four instalments, i.e , 8 to 11, are the subject-matter of C.P. No. 75 of 1982. The details of the third to seventh instalments have been given at page 4 of the judgment*. The details of the eighth to eleventh instalments are given at page 8 of the judgmentf.
28. The company entered into an agreement dated June 23, 1972 (exhibit P-1), with the bank by which the latter agreed to pay the instalments to the Techno Exports in case the former failed to do so. It was also agreed that the company would deposit with the bank a sum of Rs. 62,000 which would not carry any interest and the company would not be entitled to withdraw the amount during the continuance of the guarantee and that the machinery shall stand hypothecated with the bank. On the same day, the company sent a letter to the bank stating that it would be liable to pay Rs. 6,18,390 on account of the price of the machinery along with interest on all losses and damages and costs, charges and expenses at the State Bank of India rate or rates of interest for the time being in force. Later, the company, on October 6, 1972, executed a mortgage deed (exhibit P.-8) in favour of the bank for a consideration, of Rs. 6,18,390. In the mortgage deed, through oversight, the amount of Rs. 6,18,319 was mentioned instead of Rs. 6,18,390. Consequently, an additional mortgage deed was subsequently executed for Rs. 71 on December 12, 1972, but that document has not been exhibited and cannot be taken into consideration. In view of the aforesaid letters and the mortgage deed, it is not disputed by the defendants that the company is liable to pay the remaining instalments, i.e., Nos. 3 to 11.
29. It is to be seen now who are the guarantors for payment of the said amount and what are their liabilities.
30. Defendants Nos. 2, 3, 4, 5 and 6 executed a guarantee deed dated nil (exhibit P-3) in favour of the bank and undertook to pay the amount of guarantee jointly and severally in case the company failed to do so. The following terms and conditions in the deed are relevant:
" (i) This guarantee and/or undertaking shall remain in full force and virtue until repayment of all dues under the said import agreement dated September 4, 1967, entered into by and between the company and the said Messrs Techno Export of Sofia for the import of the machinery for setting up of the dehydration plant.
(it) This guarantee and/or undertaking shall be in addition to and not in lieu of any other indemnity, guarantee, security(ies) that the bank may at any time have from any person(s)."
31. Defendants Nos. 5, 6 and 8 created equitable mortgages of their properties for payment of the said loan by depositing the title deeds of their properties dated April 22, 1958 (exhibit P-7), dated October 20, 1955 (exhibit P-4), and dated February 12, 1960 (exhibit P-5). Thus, defendants Nos. 2, 3, 4, 5, 6 and 8 became the guarantors for the payment of the amount out of whom defendants Nos. 2 to 6 are jointly and severally liable to pay the whole of the amount and defendant No. 8 is liable to pay the amount to the extent of the value of the property mortgaged by him.
32. Now, I advert to items Nos. 2 to 7 of the said annexure. The plain tiff gave four cash credit limits to the company as mentioned at serial Nos. 2 and 4 to 6 in annexure " A ". The defendants who became guaran tors for payment of the loans have been mentioned in column No. 5 and the documents which were executed by them and the company in columns Nos. 5 and 6. The execution of the documents is not denied by the defendants.
33. Later, accounts Nos. 2, 4 and 5 were amalgamated and a cash credit hypothecation limit of Rs. 15,00,000 was given to the company on December 13, 1976. The said account is mentioned at serial No. 6 in annexure "A". Defendants Nos. 2, 4, 6 and 7 stood as guarantors for the payment of the amount and they executed documents mentioned in column No. 5 in favour of the plaintiff.
34. On January 8, 1977, accounts Nos. 3 and 6 were amalgamated and a cash credit (hypothecation) limit of Rs. 45,00,000 was given to the company. The account is mentioned at serial No. 7. Defendants Nos. 2 and 4 became the guarantors for payment of the amount. The documents mentioned in column No. 5 were got executed by the bank from them and the company. The amount of the seventh instalment relating to deferred payment guarantee was also debited to this account. Thus, all the amounts due from the company to the bank at that time were brought to this account. The bank also obtained balance confirmation (exhibit P-64) from the company. According to the balance confirmation, an amount of Rs. 55,04,645.72 was due on December 31, 1977, from the company to the plaintiff bank. The said facts are admitted by the company. Thus, it is evident that an amount of Rs. 55,04,645.72 was due to the bank from the company on December 31, 1977. The company is, therefore, liable to pay this amount with future interest to the bank.
35. The liability of defendants Nos. 2 and 4 for payment of the said amount is established from the agreement dated January 8, 1977, in Form I (Spl), exhibit P-60 and the promissory note dated January 8, 1977, exhibit P-61. Therefore, I am of the opinion that defendants Nos. 2 and 4 are liable to pay the said amount with future interest to the bank as guarantors.
36. Now, the liabilities of defendants Nos. 3 and 5 to 8 have to be determined. Their liabilities shall have to be determined taking into consideration the guarantees given by them. As already stated, the accounts for which they gave guarantees are mentioned in annexure "A" against each item in column 5. First, I shall take the case of defendant No. 8.
37. It is argued by Mr. Suri that an amount of Rs. 62,000 was deposited by the company with the bank, according to the agreement between the bank and the company, for deferred payment guarantee account. According to him, that amount is still due to the company and defendant No. 8 is entitled to the benefit of that amount. On the other hand. Mr. Chhibbar has argued that the amount of Rs. 62,000 was not deposited by the company in the bank and, therefore, the company and defendant No. 8 are not entitled to the adjustment of the said amount.
38. I have duly considered the argument and find force in the contention of Mr. Suri. The agreement dated June 23, 1970 (exhibit P-1), between the company and the bank provides that the company shall deposit with the bank a sum of Rs. 62,000 which shall not carry any interest whatsoever and it shall not be entitled to withdraw it during the continuance of the said guarantee. Exhibit P-8, dated October 6, 1972, is the mortgage deed executed by the company in favour of the bank and a similar clause was also incorporated therein. From the aforesaid documents, it is evident that the company agreed to deposit the amount of Rs. 62,000 with the bank. Exhibit P-17 is another mortgage deed dated April 2, 1973, executed by the company mortgaging its assets with the bank for giving them a clear term loan of Rs. 5,00,000 (item No. 3 in the table marked A). In the mortgage deed, it was specifically stated that the company kept a deposit of Rs. 62,000 in cash with the bank without interest. No document has been brought to my notice by Mr. Chhibbar from which it could be held that the said amount has been returned/adjusted. Consequently, I hold that the amount of Rs. 62,000 was deposited by the company with the bank, which did not carry any interest.
39. Mr. Suri, learned counsel for defendant No. 8, has further argued that the amount of four instalments, namely, instalments Nos. 3, 4, 5 and 6, was debited by the bank to the account relating to cash credit hypothecation limit of Rs. 6,00,000 and, therefore, defendant No. 8 qua those four instalments stands discharged. He further submits that the seventh instalment has not been claimed from defendant No. 8. Therefore, the first suit is liable to be dismissed against him.
40. I have duly considered the argument. The amount paid to Techno Exports on deferred payment guarantee was to be debited by the bank in some account. I do not find anything wrong if it debited the said amount in the cash credit hypothecation limit account of Rs, 6,00,000. Consequently, defendant No. 8 does not stand discharged for this reason.
41. Regarding the seventh instalment, the amount has been debited to the account of the company and is included in the amount of Rs. 55,04,645.72 as claimed by the bank. The said instalment became due to Techno Exports on June 30, 1978. All the relevant facts have been pleaded in para 24 of the plaint.
42. The contention of Mr. Chhibbar is that, through oversight, the amount of the seventh instalment was not included in the prayer clause along with the amounts of third to sixth instalments, though it was expressly pleaded in the plaint. In the circumstances, he argues, the court should include the amount of the seventh instalment in the amount claimed against defendant No. 8. In support of his contention, he made reference to Mehar Chand v. Milkhi Ram, AIR 1932 Lah 401 [FB]. I agree with the submission of Mr. Chhibbar. The following observations of the Full Bench in the above case may be read with advantage (headnote): " ...the pleadings of the parties should not be too strictly construed. It is, therefore, the duty of the courts to mould the relief to be granted to the plaintiff according to the facts proved which, however, should not be inconsistent with his pleadings."
43. I am in respectful agreement with the above observations. In the present case, all the facts have been given in the plaint by the plaintiff. It appears that, through oversight in the prayer clause, the amount claimed from defendant No. 8 does not include the seventh instalment. The observations of the Full Bench in Mehar Chand's case, AIR 1932 Lah 401 [FB], are fully applicable to the facts of the present case. Consequently, I am of the opinion that the plaintiff is entitled to recover the seventh instalment along with the amounts of third to sixth instalments from defendant No. 8 in the first suit.
44. Mr. Jaiswal argued that the amount of instalments Nos. 3, 4, 5 and 6 was debited by the bank to the cash credit hypothecation limits account of Rs. 6,00,000 and, therefore, defendants Nos. 2 to 6 stood discharged from payment of the said amounts. For the reasons given already, I reject the submission of Mr. Jaiswal.
45. Mr. Suri has next contended that the amount of five instalments, namely, instalments Nos. 3 to 7, was transferred by the bank to the cash credit hypothecation limit account of Rs. 45,00,000 and fresh agreements were entered into between the bank and the company. Moreover, two guarantors, namely, defendants Nos. 2 and 4 stood guarantee for payment of the amount, vide guarantee deed dated January 8, 1977 (exhibit P-60). In view of the aforesaid acts, defendant No. 8 stands released. In support of his contention, he places reliance on Parvatibai Harivallabhdas Vani v. Vinayak Balvant Jangam, AIR 1939 Bom 23, Pirthi Singh v. Ram Charan Aggarwal, AIR 1944 Lah 428, and Ishar Singh v. Ram Saran Dass, AIR 1958 Pun] 337.
46. I have given my thoughtful consideration to the argument but do not find any substance in this submission as well. Exhibit P-l dated June 23, 1970, is the agreement between the bank and the company by which the bank agreed to give deferred payment guarantee. Clause 9 of the agreement provides that nothing in the agreement shall prejudice or affect the rights or remedies of the bank in respect of any person or future securities that the bank may have for the time being and the bank shall have the right to enforce either or more securities singly or simultaneously for the satisfaction of its dues against the company. Defendants Nos. 2, 3, 4, 5 and 6 later gave a letter of guarantee (exhibit P-3) dated nil to the bank which also provides that the guarantee shall be independent of any other indemnity/guarantee/security which the bank may have as aforesaid and the bank shall, at its discietion, be entitled to enforce all or any of the securities as the bank may at any time have. Exhibit P-8 is the mortgage deed executed by the company in favour of the bank which also contains a similar clause. The said clause reads as follows:
" (iv) The security hereby created shall be in addition to and not in lieu of any other security which the bank may now or in future have from the company or any other person or persons relating to the debt hereby secured and the bank shall be at liberty to call for and take any other security or securities in any form in addition to or in lieu of the security hereby created and the bank shall have full authority to take recourse to enforce the security hereby created or any other security or securities which the bank may at any time have either against one or all simultaneously or at different time or times at its sole discretion, no enforcement of any other security or the failure to enforce any other security or securities shall not in any way prejudicially affect the security hereby created or company's covenants and/or obligations hereunder. "
47. Defendant No. 8 created an equitable mortgage by handing over the documents of title to his property to the bank. It is thus clear that the bank, the company and the guarantors had agreed that if the bank would accept the guarantee of other persons subsequently, the liabilities of the previous guarantors would not be affected. Mr. K. L. Bhatia, officer in the advances department of the State Bank of India (P.W. 2), appeared in the witness-box and stated that in 1970 he was dealing with deferred payment guarantees. He dealt with the account of defendant No. 1 relating to deferred payment guarantee. Defendant No. 6 deposited the title deeds by way of equitable mortgage of his property in favour of the bank. Exhibit P-4 was the original title deed of his property situated in Bareilly. Exhibit P-5 is the original title deed given by defendant No. 8 for creating equitable mortgage of the property in favour of the bank. The documents were handed over by defendants Nos. 6 and 8 to Mr. Laxman and Mr. R. C. Mathur in the bank in his presence. In cross-examination, he said that it was incorrect to suggest that all documents were taken by the bank dishonestly and there was no intention of defendants Nos. 6 and 8 to create equitable mortgage of their property in favour of the bank. Defendant No. 8 did not appear in the witness-box. That shows that the statement given by the aforesaid witness cannot be disbelieved. Defendant No. 8, in view of the aforesaid agreement between the bank and the company, cannot now be allowed to say that the deferred payment guarantee account has been amalgamated with other accounts and defendants Nos. 2 and 4 stood guarantee for the payment of the said account and, therefore, he stood discharged.
48. The cases referred to by learned counsel are distinguishable. In Parvatibai's case, AIR 1939 Bom 23, the facts were that security bonds were executed by sureties during the pendency of a suit against the principal debtor. A decree having been passed against the principal debtor, the decree-holder took out execution proceedings. The principal debtor, i.e., the judgment-debtor, went up in appeal against the decree and execution against him was stayed on the offering of fresh securities for the decretal amount. A question arose whether the old sureties were discharged by reason of the acceptance of the new surety in appeal. It was held that the first sureties were so much prejudiced by the aforesaid act that they stood discharged. In Pirthi Singh's case, AIR 1944 Lahore 428, the facts were that a creditor agreed to give time to the debtor and to pay the amount in instalments. This was done without the surety's assent or knowledge which prevented him from requiring the creditor to call upon the principal debtor to pay off the entire debt or from paying the entire debt himself and then recovering it from the principal debtor. In the circumstances, it was held that the surety stood discharged from his liability. In Iskar Singh's case, AIR 1953 Punj 337, in an application under Section 20 of the Arbitration Act, the plaintiff asked for attachment before judgment. The court issued warrants of attachment condi-
tional upon the furnishing of a surety in the sum of Rs. 1,000. The surety was furnished by one A and the warrants were withdrawn. A few days later, the plaintiffs applied for the sealing of the workshop of the respondent and for appointment of a receiver. B stood surety to the extent of Rs. 10,000 and the matter was not proceeded with further. There was no mention of the first surety at the time the second surety was given and there was nothing to show that the liability arising under the first surety deed was preserved or excluded from the sum of Rs. 10,000 mentioned in the second surety deed. In view of the aforesaid circumstances, it was observed that B's surety deed took the place of A's surety deed and the latter, therefore, stood discharged. In the present case, as already discussed above, there were various agreements between the parties that on furnishing fresh sureties or additional sureties, the original sureties ,will not stand discharged. In the circumstances, the ratio in the aforesaid cases does not apply.
49. Mr. Jaiswal has raised a similar argument. A fortiori his argument is also rejected.
50. Issue No. 4.--The two questions to be determined under this issue are, firstly, whether the plaintiff is entitled to interest on the amount of advances made by it to the company and, secondly, if so, at what rate. In Form K (exhibits P-29, P-42 and P-58), pronotes (exhibits P-14, P-21, P-38, P-27, P-61), mortgage deeds (exhibits P-8 and P-l 7), the sureties and the company agreed to pay interest to the bank. Different rates of interest have been provided in all the aforesaid documents. It is said in them that the bank will be entitled to charge interest at rates varying from 1 1/2% to 2% above the State Bank of India advance rate with minimum interest varying from 10% to 15 1/2%. Therefore, I hold that the bank is entitled to charge interest from the defendants.
51. Now, the question arises as to what rate of interest the bank is entitled to charge. As already mentioned above, according to the agreements, the bank can charge interest varying from 1 1/2% to 2% above the State Bank of India advance rate. The plaintiff did not lead any evidence to prove as to what was the State Bank advance rate. Faced with that situation, counsel for the plaintiff has argued that the bank had been charging interest from the defendants in the past by debiting the same in their account and the balances have been confirmed by the company. Consequently, the defendants cannot be allowed to say now that the interest charged by the bank was not at the correct rate. Regarding the interest to be charged in future, he referred to item No. 2 at page 231 of the bulletin issued by the Reserve Bank of India, 1985 edition, which contains the directives issued by the Reserve Bank of India under Sections 21 and 35A of the Banking Regulation Act, 1949, and which reads as follows :
Category of advances Rate of interest per cent per annum II. Minimum lending rate for commodities coming within the purview of selective credit control:
(i) Loans/advances/cash credit/overdrafts against commodities subject to selective credit control.
17.50
(ii) Sugar mills in respect of all stocks.
16.50
52. He urges that the plaintiff is entitled to interest of 2% above 17 '50% as contained in item II(i) above.
53. I have given my thoughtful consideration to the argument and gone through the statement of accounts of the company produced by the bank (exhibit P-66), the balance confirmation slips (exhibits P-32, P-31 and P-64) and the statement of interest on the outstandings in the protested bills account from November 1, 1977, to July 8, 1979 (exhibit P-67). The defendants never raised any objection about the statement of accounts (exhibit P-66). On the other hand, the balances in that account were confirmed, vide exhibits P-32, P-31 and P-64. I, therefore, agree with Mr. Chhibbar that the defendants cannot be allowed to say that the interest was not correctly debited in the account. Consequently, I am of the view that the amounts mentioned in the confirmation slips (exhibits P-32, P-31 and P-64) and the statement of accounts (exhibit P-66) are correctly given. In exhibit P-64, an amount of Rs. 55,04,645-72 is shown as due from the company as on December 31, 1977. Shri Chander Sen Gandhi (P.W-11), who was the manager of Bahalgarh branch in 1977 and 1978, affirms in his statement that exhibit P-64 shows the balance amount as on December 31, 1977. Consequently, I hold that an amount of Rs. 55,04,645.72 was due to the plaintiff from the defendant-company on December 31, 1977. However, in the statement of account (exhibit P-67) prepared for the subsequent period, the interest on that amount has been calculated at the rate of 17 1/2% up to February 28, 1978, and thereafter at the rate of 16 1/2% till July 8, 1979. As already mentioned, the plaintiff failed to prove the bank rate of interest. Therefore, we have to fall back on the minimum rate of interest provided in cash credit (hypothecation) limit of Rs. 45 lakhs which, according to pronote (exhibit P-61) and Form K (exhibit P-58), is 15 1/2%. Thus, the plaintiff can charge interest on the abovesaid amount at the rate of 15 1/2% and not at a higher rate as claimed in exhibit P-67. However, from the dates of institution of the suits till realisation of the decretal amount, I grant interest at the rate of 12% per annum on the decretal amount to the plaintiff.
54. Issues Nos. 5, 6, 7 and 8A.--These issues have not been pressed by the defendants and are, therefore, decided against them.
55. Issue No. 9.--Relief.
56. In view of the above discussion, I pass a consolidated preliminary decree in both the suits for recovery of Rs. 69, 19,208.76 in favour of the plaintiff and against the defendants jointly and severally with costs and interest at the rate of 12% per annum from the dates of institution of the suits till the date of realisation :
Provided the liability of each of defendants Nos. 2 to 8 shall not exceed the amounts mentioned against their respective names in the table given below:
Table Name & No. of Amounts in Total Whether decretal a/m the defendant (i) C.P. No. 69 is to be realised (ii) C.P. No. 75 from mortgaged/ hypothecated properly or person or both 1 2 3 4 Rs. P. Rs. P. M/s. Depro Foods Ltd.
(i) 67,10,591.86 69,19,208.76 Both Defendant No. 1
(ii) 2,08,616.90 M. P. Mittal
(i) 62,41,444.03 64,50,060.93 Person Defendant No. 2
(ii) 2,08,616.90 S. K. Bhargava
(i) 8,77,466.05 10,86,082.95 Person Defendant No. 3
(ii) 2,08,616.90 P. Singal
(i) 62,41,444.03 64,50,060.93 Person Defendant No. 4
(ii) 2,08,616.90 J. S. Aggarwal
(i) 42,71,432.16 44,80,049.06 Both Defendant No. 5
(ii) 2,08,616.90 R. A. Gupta
(i) 45,16,025.31 47,24,624.21 Both Defendant No. 6
(ii) 2,08,616.90 B. K. Aggarwal
(i) 44,04,504.63 44,04,504.63 Person Defendant No. 7 B. P. Gupta
(i) 2,27,466.05 4,36,082.95 Only mortgaged Defendant No. 8
(ii) 2,08,616.90 property.
(2) The decretal amount can be realised from the person/mortgaged/ hypothecated properties of the defendants as mentioned in column 4 of the table given above.
(3) The amount recovered from each of defendants Nos. 2 to 8 shall be adjusted in the account ( ? ) for which he stood surety.
(4) The plaintiff shall be entitled to get the sale proceeds of the machinery already sold by the official liquidator from him subject to the provisions of the Companies Act.
(5) The decretal amount be paid within four months, failing which the plaintiff shall be entitled to apply to the court for a final decree for sale of the mortgaged property.
(6) Decree be drawn up in Form 5A of appendix "D", Code of Civil Procedure.