Delhi District Court
And Corporate Office At vs Cordiale Merchandising (India) ... on 5 January, 2016
ID No.02401C0045832013
IN THE COURT OF DR.VIJAY KUMAR DAHIYA: ADDL.
DISTRICT JUDGE (CENTRAL07), TIS HAZARI COURTS : DELHI.
SUIT NO.86/2015
ICICI Bank Limited,
Having its Branch Office at :
2nd Floor, Videocon Towers,
Block E1, Jhandewalan Extension,
New Delhi - 110 055.
Registered office at :
Landmark, Race Course Circle,
Alkapuri, Vadodara - 390 007.
And Corporate Office at :
ICICI Bank Towers,
Bandra Kurla Complex,
Mumbai 400 051
Through : Sh. Bhaskar Mishra ..........PLAINTIFF
VERSUS
1. Cordiale Merchandising (India) Limited,
Having its office at :
G9, Ashok Plaza Building,
12 A/14, W.E.A. Karol Bagh,
New Delhi - 110 005.
2. Shri Manish Ahluwalia,
Director
Cordiale Merchandising (India) Limited,
G9, Ashok Plaza Building,
1/14 ICICI Bank Ltd. Vs. Cordiale Merchandising
12 A/14, W.E.A. Karol Bagh,
New Delhi - 110 005.
3. Sh. Naveen Pamnani,
Director,
Cordiale Merchandising (India) Limited,
G9, Ashok Plaza Building,
12 A/14, W.E.A. Karol Bagh,
New Delhi - 110 005. ...........DEFENDANTS
Date of Institution : 01.02.2013
Date when the case reserved for order : 02.01.2016
Date of Order : 05.01.2016
J U D G M E N T
1. The plaintiff filed the suit for recovery of Rs. 6,24,212/ alongwith pendentelite and future interest against the defendants. The defendant no.3 contended that suit is barred qua 2 as the guarantee was upto February 2008, therefore suit deserves to be dismissed.
2. Brief facts of the case of the plaintiff are like this. The plaintiff is a banking company registered under the Indian Companies Act 1956. The operation of the plaintiff bank are subject to the guidelines promulgated by the RBI from time to time. The suit has been filed by Sh. Bhasker Mishra who has been duly authorised to file, sign, verify and institute the suit by virtue of power 2/14 ICICI Bank Ltd. Vs. Cordiale Merchandising of attorney duly executed in his favour by the directors of the plaintiff company. The defendant no.1, a limited company through its directors Sh Manish Ahluwalia and Sh. Naveen Pamnani approached the plaintiff bank for grant of over draft facility, which was executed in the current account no. 629105036379 maintained by the defendant no.1 at the branch of plaintiff at Karol Bagh, New Delhi in the month of February 2006, after due execution of loan documents by defendants including the guarantee deed executed by defendant no.2 and 3 in favour of the plaintiff. The OD facility was extended to defendant no.1 through documents namely credit agreement dated 23.02.2006, terms and conditions of OD facility, personal guarantee of defendants no. 2 & 3 and renewal letter dated 26.02.2007 for one year from the date of sanction as per the terms and conditions contained in the credit arrangement letter. The defendants failed to adhere to the financial discipline and acted contrary to the terms and conditions governing the aforesaid OD facility.
3. The defendants have been constantly defaulted in repayment of the contractual dues/ obligation and failed to pay the said amount despite repeated reminders, requests and demands. The defendants failed to regularize the accounts despite getting several opportunities and further failed to make payment of the outstanding amount due and payable by the defendants. As per the statement of accounts, the defendants are to make payment of Rs 6,24,212/ as on 10.11.2012. Hence the present suit.
4. The defendants were served with summons for settlement and the defendant no.2 & 3 filed written statement and other defendant no.1 was 3/14 ICICI Bank Ltd. Vs. Cordiale Merchandising proceeded exparte. The defendant no.2 filed Written Statement raising preliminary objection regarding maintainability of the suit. The suit has not been filed by duly authorised person. It is submitted that defendant no.2 is not the director of defendant no.1 and no OD facilities was extended to defendant no.1 under the guarantee of defendant no.2 through documents dated 23.02.2006 with interest of benchmark advance rate 11.75% p.a, the cash credit risk premium of 5 % p.a and applicable rate on the OD facility was 13.75% p.a. Defendant no.2 denied having any loan documents in favour of the plaintiff as a guarantor of defendant no.1. It is further denied that defendant no.2 had ever agreed to pay interest as alleged. Every averment of the plaint is denied.
5. Defendant no.3 filed written statement and submitted that suit is barred by limitation. The defendant admitted that OD facility of Rs.4 Lacs was extended to defendant no.1 which expired on 25.02.2008. The plaintiff allow defendant no.2 to illegally withdraw an amount of Rs.5,40,000/ through withdrawal on 03.03.2010 which fact was brought to the notice of plaintiff bank by defendant no.3 through email dated 15.04.2010. The defendant through e mail dated 15.04.2010 had intimated plaintiff bank regarding disassociation of defendant no.3 from defendant no. 1 & 2. The plaintiff after expiring of the OD facility on 25.02.2008 allowed defendant no. 2 to open new accounts no. 629105036431 in the name of CMI Social Research Centre and another account no. 629105042717 in the name of Cordiale Merchandising (India) Ltd. And plaintiff along defendant no.2 withdraw the amount of Rs 54,000 on 03.03.2010. The defendant no. 3 is not liable to pay anything after expiry of the OD facility in February 2008.
4/14 ICICI Bank Ltd. Vs. Cordiale Merchandising
6. On the pleadings of the parties, vide separate order dated 01.11.2013, Ld. Predecessor of this court framed the following issues :
(1.) Whether the suit is barred by limitation ? OPD (2.) Whether the plaint is liable to be rejected for want of cause of action ? OPD (3) Whether the plaintiff is entitled for recovery of the suit amount ? OPP (4) Whether the plaintiff is entitled for pendentelite and future interest on decree amount ? If so, at what rate ? OPP (5) Relief.
7. The plaintiff in order to prove its case examined Mr. Bhaskar Mishra, A/R of the plaintiff as PW1 and tendered his affidavit in evidence is Ex.PW1/1. He relied upon copy of power of attorney as Ex.PW1/A; original credit arrangement letter dated 23.02.2006 as Ex.PW1/B, original terms ad conditions of OD facility Ex.PW 1/C, credit arrangement letter dated 23.02.2006, terms and conditions governing OD Facility, personal guarantee of Directors collectively Ex. PW 1/D, certified copy of statement of accounts Ex.PW 1/E, certificate under Bankers Books of Evidence Act ex. PW 1/F.
8. Defendants did not lead any evidence.
9. I have heard the ld. counsels for the parties and have perused the material available on record.
5/14 ICICI Bank Ltd. Vs. Cordiale Merchandising My issue wise findings are given as under : ISSUES NO.1 to 4
10. All these issues are interconnected and interdependent in view of the defence of defendant no. 1 & 3. The plaintiff has proved that OD facility was availed by defendant no.1 and defendants no.2 and 3 stood guarantor of defendant no.1 for such OD facility through documents Ex.PW1/B to Ex. PW 1/E. There is only one Form of Guarantee dated 13.02.2006 executed by defendant no.2 and 3 and thereafter no documents was executed by defendant no.2 and 3 and the present suit was filed in 01.02.2013 i.e after 6 years. It is proved and admitted case that on the promise of defendant no.1 to liquidate the outstanding dues of plaintiff bank the defendant no.2 & 3 executed guarantee agreement in favour of the plaintiff bank. In order to show the liability of defendant no. 2 & 3 and the suit being within limitation, Ld.. counsel for plaintiff has drawn support from Clause 3, 4, 9, 14, 15 and 17 of From of Guaranteer executed by defendant no. 2 & 3, in order to contend that defendants no.2 and 3 are liable for the suit amount having these executed the continuing guarantee in favour of plaintiff. These clauses are reproduced as under :
"3. In the event of any default on the part of the Borrower in payment/repayment of any of the moneys referred to above, or in the event of any default on the part of the Borrower to comply with or perform any of the terms, conditions and covenants contained in the Letter, the Guarantors shall, upon demand, forthwith 6/14 ICICI Bank Ltd. Vs. Cordiale Merchandising pay to ICICI Bank without demur all the amounts payable by the Borrower in respect of the OD Facility in accordance with the terms of the Letter.
4. The Guarantors shall also indemnify and keep ICICI Bank indemnified against all losses, damages, costs, claims and expenses whatsoever which the ICICI Bank may suffer, pay or incur by reason of or in connection with any such default on the part of the Borrower including legal proceedings taken against the Borrower and/or the Guarantors for recovery of the moneys referred to in Clause 2 above.
9. The rights of ICICI Bank against the Guarantors shall remain in full force and effect notwithstanding any arrangement which may be reached between the ICICI Bank and the other guarantor/s, if any, or notwithstanding the release of that other or others from liability and notwithstanding that any time hereafter the other guarantor may cease for any reason whatsoever to be liable to ICICI Bank, ICICI Bank shall be at liberty to require the performance by the Guarantors of their obligations hereunder to the same extent in all respects as if the Guarantors had at all times been solely liable to perform the said obligations.
14. This Guarantee shall not be wholly or partially satisfied or exhausted by any payments made to or settled with ICICI Bank by the Borrower and shall be valid and binding on the Guarantors and operative until repayment in full of all moneys due to ICICI Bank under the Letter.
15. This Guarantee shall be irrevocable and the obligations of the Guarantors hereunder shall not be conditional on the receipt of any prior notice by the 7/14 ICICI Bank Ltd. Vs. Cordiale Merchandising Guarantors or by the Borrower and the demand or notice by the ICICI Bank as provided in Clause 19 hereof shall be sufficient notice to or demand on the Guarantors."
11. According to Ld. Counsel for plaintiff these clauses clearly depicts that the period of limitation stand extended the moments defendant no.1 acknowledged its liability by making payment on 12.02.2010 of Rs. 21,000/ in cash to the plaintiff. Otherwise also, the account was a 'live account' till May 2012. Therefore, the suit is filed within limitation. The plaintiff had extended the OD facility to defendant no.1 on 06.02.2006 and the account of defendant no.1 is still 'live account', therefore, the continuing guarantee given by defendant no. 2 & 3 never came to end and suit is filed within period of limitation, therefore the liability of defendant no.2 and 3 is coextensive with that of the principal borrower unless it is otherwise stipulated for by the contract as provided under Section 128 of the Contract Act. The continuing guarantee given by defendant no. 2 & 3 could be revoked by them at any time that it would not enure in respect of the future transactions. But in the present case, the defendant no.2 and 3 have not revoked the guarantee nor they have given any notice to the plaintiff. Therefore, in the absence of any revocation, the liability of the guarantors continues till the debt is alive. In the case of such a continuous guarantee, as contended, so long as the account is a live account in the senses that it is not settled, and there is no refusal on the part of the guarantor to carry out the obligation of the OD facility, limitation would run from the date of breach of contract under article 113 of the schedule to the limitation Act 1908. In the present case, the guarantors have not 8/14 ICICI Bank Ltd. Vs. Cordiale Merchandising revoked or broken the guarantee and as such, as long as the account remained a live account, and there was no refusal on the part of the guarantors to carry out their obligations, the period of limitation did not commence to run and hence the guarantors are liable. In this regard reliance is placed upon "Sybdicate Bank vs. Channaveerappa Belreri" AIR 2006 SC 1874.
12. Per contra Ld. Counsel for respondent no.3 has contended that defendant n. 2 & 3 never made an acknowledge of the debt as done by defendant no.1 under section 19 of the Limitation Act 1908 as alleged, therefore, the claims against them is barred by time. Even for the sake of arguments, it is presumed that the guarantee given by defendant no.3 is 'continuing guarantee', even then time barred debt against defendant no.3 cannot be enforced as there can be estoppel against a statute. A continuous guarantee can't be enforced against the statute for raising of a time barred debt. In this regard, he has relied upon "Indian Bank vs. Mrs. Humera Mumtaz & Ors." RA27/2002 (OA313/1997 : DRTI, Chennai), "Central Bank of India vs. Systems & Softwares & Ors." 2003 (69) DRJ 56. The statement of account not proved as per law and no person can be saddled with liability only on the basis of entries in the statement of account. In this regard reliance is placed upon "Chandradhar Goswami & Ors. vs. The Gauhati Bank Ltd." C.A. No.733 of 1964.
13. The agreement of OD facility executed by defendant no.2 & 3 is a continuing guarantee and the same is stated so in clause 17 of the agreement, 9/14 ICICI Bank Ltd. Vs. Cordiale Merchandising and therefore, the guarantors are liable, there is no dispute about the same. This clause in the agreement has got the sanction u/s 129 of the Indian Contract Act 1872. But this sanction does not say that the time barred debt would come under the preview of continuing guarantee. No doubt, there is nothing on record to show that defendant no. 2 & 3 have revoked the guarantee. But that does not mean the guarantors can be liable to a debt which is contended by defendants no.2 and 3 as time barred. It may be noted here that defendant no.1's account was in operation upto May, 2012 and defendant no.1 has not entered into a fresh contract changing the conditions of the contract of guarantee to the disadvantage of defendants no.2 and 3. I found force in the contention of the plaintiff that in case of continuing guarantee, so long as the account is a live account i.e the account is not settled and there is no refusal on the part of the guarantor to carry that obligation, the period of limitation did not at all start to run.
14. It may be noted that the defendant no.1 operated the OD facility account in terms of statement of account Ex.PW 1/E upto 1st May, 2010 and the last payment deposited by the defendant no.1 in the said statement of account is 12.02.2010. The contention of the counsel for the plaintiff is that live account was maintained by the plaintiff in respect of the defendant no.1 company. It is relevant to mention here that the work 'live account' means account that is not settled. The use of the terms 'settled' gives an indication that a 'live account' refers to an account where the balance has not been struck by an "account stated" or "account settled". There can be account stated although the balance of indebtedness is not through out in favour of one side. It is irrelevant 10/14 ICICI Bank Ltd. Vs. Cordiale Merchandising whether the debt in favour of the creditor is created by one large payment or consists of several sums of principal and several sums of interest. Nor it is material whether the only payments made on the other side were simply payment in reduction of such indebtedness or were payment made in respect of other dealings. In any event, item must be ascertained and agreed on each side before the balance can be struck and settled. Therefore, it can be held that upto the above said date the account maintained by the plaintiff in respect of defendant no.1 is a 'live account'. Further more, the payment made by the defendant no.1 in OD Account as stated supra tentamounts to an acknowledge of its liability u/s 19 of the Limitation Act. The defendants no.2 and 3 have executed a continuing guarantee. The liability of a guarantor will arise dependent on the terms of the contract/guarantee agreement. Therefore, so long as account is live and there is no refusal on the part of the defendant/guarantor to carry out the obligation the period of limitation cannot be said to have commenced running in the present case. The guarantor/defendant no.2 and 3 through guarantee agreement had agreed to pay and satisfy the plaintiff on demand as the guarantee was for the amount payable on demand. The word, 'payable on demand' have different meaning when applied with reference to money lent and money deposited and in case of later it would mean that "payable when actually demand for payment is made".
15. So far as the case law 'Indian Bank' relied upon by the counsel for defendant no.3 is concerned, suffice it to say that the question involved in that case law was whether the renewal of debt by the borrowers (principal debtor) would renew the liability of the guarantor but in the present case there is no 11/14 ICICI Bank Ltd. Vs. Cordiale Merchandising renewal of the liability by borrower but account of defendant no.1 was a 'live account'. Similarly, the case law Central Bank of India (supra) the petitioner bank (therein) failed to get the deed of guarantee renewal at the time he got renewed loan documents from the principal debtor. Therefore, this judgment is also distinguishable from the facts of the present case. The judgment C. Goswami (supra) pertains to Section 34 of Indian Evidence Act but herein in the present case the plaintiff has proved not only statement of account but other loan documents. Therefore, this judgment has no applicability to the present case.
16. In the present case, the account was live and operated upto May, 2012. The suit was filed on 01.02.2013. therefore, the suit was filed within 03 years as the period of limitation is three years both under Article 55 and under Article 113 of CPC as has been observed by Hon'ble Supreme Court in para 18 of the judgment Syndicate Bank (supra) which is reproduced herein :
"18. Some arguments were addressed about the Article of limitation that would apply in respect of a suit against the guarantors. Samuel (supra) held that in the case of refusal of a guarantor to pay the amount, the matter would be governed by Article 115 of the Schedule to the Limitation Act, 1908, which corresponds to Article 55 of the Limitation Act, 1963. One of the submissions made before us was that the term 'compensation for breach of contract' in Article 55 indicates to a claim for unliquidated damages and not to a claim for payment of sum certain (as to what is the difference between a claim for unliquidated damages and not to a claim for a sum certain or a sum presently due, reference can advantageously be made 12/14 ICICI Bank Ltd. Vs. Cordiale Merchandising to the classic statement of Law by Chagla, CJ, in Iron and Hardware (India) ltd. vs. MANU/MH/0115/1954 : Firm Shamlal & Bros. AIR 1954 Bom 423. If Article 55 does not apply, then a claim against a Guarantor in such a situation may fall under the residuary Article 113 of the Limitation Act, 1963 corresponding to Article 120 of the old Act. The controversy about the appropriate Article 120 of the old Act. The controversy about the appropriate Article applicable, when the claim is found to be not exactly for 'compensation' but ascertained sum due has been referred to as long back as 1916 in Tricomdas Cooverji Bhoja vs. MANU/PR/0029/1916.
Gopinath Jin Thakur Under the old Limitation Act (Act of 1908), the periods prescribed were also different under Article 115 and 120. But under the 1963 Act, the period of limitation is 3 years both under Article 55 and Article 113, and having regard to the binding decision in Samuel (supra), we do not propose to examine the controversy as to whether the appropriate Article is 55 or 113. Suffice it to note that even if the Article applicable is Article 113, the Bank's suit is in time."
17. Therefore, from any angle it is examined the claims of the plaintiff against defendant no.2 & 3 is neither barred by limitation nor it can be held as not maintainable in view of plaintiff's failure to get form of guarantee renewed at any point of time after February 2008. As a consequence, suit against defendant no.2 & 3 decreed. In addition to it, the suit of the plaintiff against defendant no.1, succeeds on the basis of documents executed by defendant no.1 in February, 2006 and particularly the acknowledgment of liability. Thus, issues no.1 to 4 are decided in favour of the plaintiff and against the defendants.
13/14 ICICI Bank Ltd. Vs. Cordiale Merchandising RELIEF
In view of the foregoing discussion and my findings recorded on the issues no.1 to 4, I am of the opinion that suit of the plaintiff deserves to be decreed and is hereby decreed. A decree for a sum of Rs.6,24,212/ alongwith pendentelite and future interest @ 9 % p.a. is passed in favour of plaintiff and against defendants. No order as to cost. Decree sheet be prepared accordingly.
File be consigned to Record Room.
Announced in the open court, (Dr. VIJAY KUMAR DAHIYA) On 5th day of January, 2016. ADJ(Central07)/DELHI 05.01.2016 14/14 ICICI Bank Ltd. Vs. Cordiale Merchandising