Delhi District Court
State Bank Of Patiala vs Sh. Rajiv Kaistha Second Address on 14 July, 2011
IN THE COURT OF SHRI SUNIL KUMAR AGGARWAL:
ADDL. DISTRICT JUDGE (C) 10: DELHI.
Suit No. 141/2006
State Bank of Patiala
Having its Head Office at the Mall,
Patiala, (Punjab) and one of its Branch Office
amongst other places, at 3233, Raja House,
Nehru Place, New Delhi110019 ...Plaintiff
VERSUS
1. Sh. Rajiv Kaistha Second Address:
S/o Sh. G. L. Kaistha, D43, Hosiery Complex
proprietor, M/s. Mint Fortunz, Phase - II Extn.,
27, Siddharth Enclave NOIDA (U.P.) 201301
New Delhi - 110014
Third Address: Fourth Address:
B10, Second Floor, C/O M/S Viva Global,
Sector 7, 413, Udyog Vihar Phase III
NOIDA (U.P.) 201301 Gurgaon.
Fifth Address:
Mona Design,
888, Phase - V,
Near Hilton Hotel,
Gurgaon.
2. Smt. Om Piyari,
W/o Sh. Mohan Lal
Guarantor and Mortgagor,
F40, Pandav Nagar,
Shahdara, Delhi.
Suit No. 141 of 2006 Page no. 1 of 17
3. Sh. Gopal Krishan Bhasin,
S/o. Late Sh. T. R. Bhasin,
Guarantor,
H30, Sector - 39,
NOIDA (U.P.)
Second Address:
8/5, W. E. A. Karol Bagh
New Delhi 110005 ...Defendants
Suit presented on 11.05.2006
J U D G M E N T
1. Present suit for money recovery including claim under Order XXXIV CPC for sale of mortgaged property has been filed by plaintiff, a body corporate constituted under the State Bank of India (Subsidiary Banks) Act, 1959 through Sh. M.P.S Rana, Deputy Manager and one of the Principal Officers stating that defendant no. 1 is carrying on his business of manufacturing and exporting ready made garments as proprietor of M/s. Mint Fortunz. He had approached plaintiff for grant of financial assistance. After due and usual verification, the plaintiff granted him packing credit limit/foreign bill purchase limit of Rs. 15,00,000/ and had got executed agreement of loan for over all limit, agreement of hypothecation of goods, assets, book debts, outstanding moneys receivable, insurance policies, securities, in his possession or control wherever lying, stored and kept in present and in future in favour of the plaintiff, agreement to pledge the Suit No. 141 of 2006 Page no. 2 of 17 goods and assets, letter regarding grant of individual limits within overall limit, from him son 28.06.2003. Defendants no. 2 and 3 had stood guarantors by signing deed of guarantee on the same date. Defendant no. 2 had also created equatable mortgage in favour of plaintiff in respect of her immovable property bearing plot no. 122, Block C, Banarsi Dass Scheme, new number B37, Azad Nagar, Shahdra Municipal Committee, Shahdra Delhi for securing repayment of the financial facility granted to defendant no. 1, by depositing registered sale deed dated 30.12.1997 with plaintiff.
2. On grant of credit limit, a PCL account and a current account were opened in the name of defendant no. 1 at its branch 3233, Raja House, Nehru Place, New Delhi. Defendant sought release of PCL for meeting export order for US$ 48,930.60 vide his applications dated 28.06.2003 and 30.06.2003. He had undertaken to submit the related export bills within 90 days or within the validity date of letter of credit failing which he will not be entitled to concessionary rate of interest. Believing him plaintiff had released a sum of Rs. 9,00,000/ on 28.06.2003 and 6,00,000/ on 30.06.2003. The aforestated export order was initially to be executed by 05.07.2003 as per the terms of letter of credit and the defendant no. 1 was required to submit the export documents. Defendant no. 1 had submitted letter dated 22.06.2003 saying that the buyer had agreed to extend the letter of credit up to 20.07.2003. Defendant no. 1, however failed to submit the export documents despite several reminders and requests. He had Suit No. 141 of 2006 Page no. 3 of 17 acknowledged his liability time and again and promised to pay the outstanding amount but failed. He had executed balance confirmation letter dated 05.05.2004. The plaintiff had also sent various written reminders to defendant no. 1 and was ultimately forced to send legal notice dated 08.03.2006 to the defendants but they failed to liquidate the outstanding amount. As per the books of account, maintained by the plaintiff in regular course of its business, a sum of Rs. 4,25,036/ was found due and payable by defendant no. 1 besides interest from 01.07.2003 onwards. As per the accounting procedure followed by plaintiff and instructions of Reserve Bank of India no interest is debited in the account from 30.09.2003 when it was declared non performing asset but plaintiff is entitled to recover the same from the defendants.
3. Although concessionary rate of interest @ 7.5% p.a. was to be charged from the defendants but since defendant no. 1 failed to submit the export documents, he is not entitled to concessionary interest but is liable to pay @ 15.5 % p.a. from 01.07.2003 and @ 14 % p.a. with monthly rest from 01.07.2004. The total interest calculated till the date of filing of the suit comes to Rs. 4,12,652.53. A further sum of Rs. 1,150/ is outstanding against the defendant in his current account no. 01000010663. The defendants thus are jointly and severally liable to pay the total due amount of Rs. 8,38,838.53 to the plaintiff with interest. Preliminary decree against defendant no. 2 in respect of mortgaged property is liable to be passed.
Suit No. 141 of 2006 Page no. 4 of 17
4. Summons for settlement of issues were repeatedly sent to the defendants no. 1 and 2 at their available addresses in ordinary manner as well as through registered post but they were found existing on none of them. Plaintiff could not locate their latest particulars therefore an application under Order V Rule 20 CPC for directing their substituted service was moved. Considering that there is no other alternative to serve defendants no. 1 and 2 personally, the application was allowed and they were directed to be served by means of publication. Accordingly, the proclamation for defendants no. 1 and 2 was carried in 'National Herald' in its issue of 09.11.2006 of which copies were sent to the defendants at all of their addresses through UPC by the publisher. The same must have been delivered within 710 days of posting. Despite deemed service, defendants no. 1 and 2 did not turn up. They were therefore proceeded exparte on 10.01.2007.
5. Only defendant no. 3 has contested the suit. He has taken preliminary objections in the written statement to the effect that the suit is barred by limitation and this court has no jurisdiction to entertain and decide it. He has denied having stood guarantor/surety of defendant no. 1. It is alleged that certain documents have been fabricated and manipulated by the officials of the plaintiff to implicate him in this case. The plaintiff willfully did not execute the hypothecation agreement with defendant no. 1 by selling goods and assets of M/s. Mint Fortunz nor action was taken in respect of Suit No. 141 of 2006 Page no. 5 of 17 immovable property equitably mortgaged by defendant no. 2 for securing the loan. It has been contended that officials of plaintiff were in hand and glove with defendants no. 1 and 2 who have been spared. On merits, the authorization of signatory to plaint has been controverted. It is contended that the bank officials had obtained his signatures on several blank documents in 2002 when defendant no. 3 had applied for export packing credit facility of Rs. 25,00,000/ in the name of his concern M/s. GABS from the same branch of the bank and the same have been misused by interpolating the particulars of loan granted to defendant no. 1. The bank officials had also obtained his signatures on a number of blank loan documents when he had availed housing loan from plaintiff. He thus claimed to have been falsely impleaded in this suit.
6. Defendant no. 3 has further resented that financial report and stock position submitted by the borrower with the plaintiff has not been produced in the Court to show the last Balance Sheet of M/s. Mint Fortunz. The plaintiff miserably failed to recover the dues from letter of credit within 90 days despite willful defaults committed by defendant no. 1 in active connivance with bank officials nor a cheating case was lodged by the latter against the former. It has been denied that the plaintiff has served any legal notice upon defendants no. 1 and 2. The same has however been suitably replied by defendant no. 3. No reason has been furnished for non initiation of proceedings under SARFAESI Act against the mortgaged immovable Suit No. 141 of 2006 Page no. 6 of 17 property and if the same have been initiated, parallel suit for recovery cannot be maintained. It is lastly stated that the defendants were settled in NOIDA and Gurgaon therefore this Court has no territorial jurisdiction to entertain the suit. Since it is not a mortgage suit, mere mention of mortgaged property of Delhi is not relevant for deciding territorial jurisdiction. On these pleas dismissal of suit with costs is urged.
7. Replication is formality of reiterating the contents of plaint and refuting those of written statements. Since the liability of borrower and guarantor is joint and several, the creditor can proceed against either or both of them to seek recovery. It is stressed that the documents were duly filled up and were explained to the defendants before they were executed by them. The involvement of bank officials as alleged by defendant no. 2 in the matter has been controverted. It is also denied that defendant no. 3 remained unaware of the execution of balance confirmation letter and other acknowledgments by defendant no.1. It has also been stated that the written statement has not been verified as per the requirements of Code of Civil Procedure.
8. On the pleadings of the parties following issues were framed on 02.04.2007:
1. Whether the plaint is filed by a duly authorized person? OPP
2. Whether the defendant did not stand any guarantee/surety of the loan transactions as Suit No. 141 of 2006 Page no. 7 of 17 claimed by the plaintiff and whether documents of guarantee are forged and fabricated? OPD
3. Whether the suit is barred by limitation? OPD
4. Whether this court has no jurisdiction to entertain and try the present suit? OPD
5. Whether this suit is barred in view of preliminary objection No. 6 of the written statement of defendant no. 3?
6. Whether the plaintiff is entitled to a decree in the sum of Rs. 838838.53 along with interest as prayed for, if so, against which of the defendants?
7. Whether the plaintiff is entitled to a preliminary decree U/o 34 CPC in respect of the mortgaged property?
8. Relief.
9. Plaintiff has examined two witnesses in support of its case. PW1 Sh. D. V. Gupta, Chief Manager has proved loan application for Ex. PW1/1, agreement of loan Ex. PW1/2, hypothecation deed Ex. PW1/3, agreement of pledge Ex. PW1/4, deed of guarantee Ex. PW1/5, letter regarding grant of individual limits Ex. PW1/6, letters of defendant no. 2 confirming creation of equitable mortgage Ex. PW1/7 and Ex. PW1/8, sale deed Ex. PW1/9, certified copy of sale deed in favour of predecessor of defendant no. 2 Ex. PW1/10, affidavit Ex. PW1/11, request for defendant no. 1 for release of amounts under financial facility Ex. PW1/12 and Ex. PW1/13, letter of credit Ex. PW1/14, letter informing the consent of buyer Suit No. 141 of 2006 Page no. 8 of 17 for extending L/C Ex. PW1/15, letters/acknowledgments written by defendant no. 1 Ex. PW1/16 to Ex. PW1/26, balance confirmation letter Ex. PW1/27, requests and reminders of plaintiff Ex. PW1/28 to Ex. PW1/37, besides narrating the relevant facts. PW2 Sh. MPS Rana, Deputy Manager has proved sanction under delegation of financial powers Ex. PW2/1, extract of minutes of meeting dated 30.04.2003 of the board of directors of the plaintiff Ex. PW2/2 and Ex. PW2/3 and extract of minute of meetings of the executive committee of plaintiff Ex. PW2/4, letters written by the plaintiff to the defendants, Ex. PW2/5 to Ex. PW2/7, legal notice Ex. PW2/8, postal receipts Ex. PW2/9, reply received from defendant no. 3 Ex. PW2/10, statement of account Ex. PW2/11, calculation sheet of accrued interest Ex. PW2/12, statement of current account Ex. PW2/13 and statement showing total outstanding against the defendant Ex. PW2/14. Plaintiff closed the evidence on 06.03.2010.
10. Defendant no. 3 on getting chance to lead evidence, filed his affidavit dated 27.04.2010 but mysteriously abandoned the suit thereafter. None appeared on his behalf on 03.11.2010 onwards. He was proceeded exparte on 20.04.2011.
11. None on behalf of the plaintiff had addressed arguments despite waiting since morning. I have carefully gone through the file. The issue wise findings are recorded hereunder: Issue No. 1 Suit No. 141 of 2006 Page no. 9 of 17
12. It has not been disputed that the plaint has been signed and verified by Sh. MPS Rana and that he was working as Deputy Manager at the concerned branch of plaintiff at the relevant time. He held the same position till his deposition was recorded in the Court from 2007 to 2010. Having held the managerial position and produced all the necessary original documents with the plaint, it can legitimately be perceived that he was one of the controlling officers of the Nehru Place Branch of plaintiff eligible for being called 'Principal Officer' connoted in Order XXIX CPC. By virtue thereof he was competent to sign and verify the plaint. He has duly been authorized to initiate legal action for recovery of debts by bank through its hierarchy vide resolutions Ex. PW2/4, Ex. PW2/3, Ex. PW2/2 and finally the delegation percolating from Deputy General Manager in Ex. PW2/1. It has been held in United Bank of India Vs. Naresh Kumar II (1996) Banking Cases 550 (SC) that even in the absence of a formal letter of authority or power of attorney, a person referred to in Order XXIX Rule 1 CPC can by virtue of the office which he holds, sign and verify the pleadings on behalf of the corporation, in addition thereto and dehors Order XXIX Rule 1 CPC, it can duly authorize any person to sign plaint or written statement on its behalf and this would be regarded as sufficient compliance of Order VI Rule 14 CPC.
13. Even though letter Ex. PW2/1 does not clearly mention the year of its execution yet the witness has categorically specified that it was Suit No. 141 of 2006 Page no. 10 of 17 signed by the Deputy General Manager of the plaintiff on 27.11.2005. No questions doubting the authorization of Sh. Rana to institute the plaint were put to him in crossexamination. The suit thus is held to have been filed by a competent person. Issue is decided in affirmative. Issue No. 3
14. The loan was sanctioned and disbursed to defendant, of course against execution of financial documents, on 28.06.2003. The present suit for recovery of outstanding amount has been filed on 11.05.2006. It is well within limitation even without considering the balance confirmation letter dated 05.05.2004 Ex. PW1/27 and various other letters of defendant no. 1 wherein he has positively committed to pay entire dues of the plaintiff. The issue is therefore decided in negative.
Issue no. 4
15. Section 20 CPC provides that a suit may be instituted at a place where cause of action or part thereof has accrued. The application for advance submitted by defendant no. 1 Ex. PW1/1 shows that it was submitted by him giving his address of Sidharth Enclave, New Delhi, at Nehru Place, New Delhi, branch of the plaintiff. He had also specified the address of Sector 7, NOIDA of his factory, but the entire loan documents Ex. PW1/2 to Ex. PW1/6 were executed at Delhi. Defendant no. 3 has not claimed that his signatures on Ex. PW1/5 were obtained outside Delhi. The contract between the parties thus had concluded in Delhi. Further the Suit No. 141 of 2006 Page no. 11 of 17 defendant no. 2 had sent letter confirming the creation of equitable mortgage Ex. PW1/7 and Ex. PW1/8 to the plaintiff from her Shahdara, Delhi address. Even the mortgaged immovable property is situated in Delhi. Defendant no. 3 seems to have overlooked the title of suit wherein the claim being specifically under Order XXXIV CPC finds mention. Multiple causes of action for initiating recovery proceedings thus had accrued in favour of plaintiff in Delhi. This Court therefore, has territorial jurisdiction to entertain and try this suit. The issue is accordingly against the defendant. Issue no. 5
15. Onus to prove this issue was upon the defendant no. 3 who mysteriously vanished from the scene when his chance came to enter into witness box. True that the plaintiff did not chase defendant no. 1 in right earnest in order to give effect to deed of hypothecation Ex. PW1/3 but a number of letters exchanged between them reveal that the defendant no. 1 was trying to reestablish himself after his consignment directed to foreign buyer fell through. Attaching his goods and assets at that point of time might have ruined him. It was not a good financial proposition. Defendant no. 1 in tune with his assurances made certain payments during that period only because of repetitive persuasion of plaintiff. It cannot be blatantly alleged that bank officials were in hand in glove with the principal borrower just to prejudice defendant no. 3. In any case the defendant no. 3 has failed Suit No. 141 of 2006 Page no. 12 of 17 to discharge the initial onus of proving this issue. It is therefore decided against him.
Issue no. 2
16. PW1 has testified that deed of guarantee Ex. PW1/5 was signed and executed by defendants no. 2 and 3 in his presence on 28.06.2003. No questions doubting the presence of defendants no. 2 and 3 together to stand as guarantors of defendant no. 1 with PW 1 were put to him in cross examination. A simple suggestion that signatures of defendant no. 3 on Ex. PW1/5 were obtained at the time of sanction of loan to defendant no. 3 in the name of M/s. GABS was given which the witness denied. Another suggestion that defendant no. 3 had never stood guarantor of the subject loan or that documents containing his signatures has been misused, was also controverted. In contrast the relevant suggestions were put to PW2 in crossexamination which served no purpose because the witness did not claim the execution of deed Ex. PW1/5 either in his presence or even during his posting at the concerned branch. PW1 was posted at Nehru Place branch of plaintiff from June 2002 to January 2004. Defendant no. 3 claims to have taken packing credit facility of Rs. 25,00,000/ in the name of M/s. GABS from the same branch in 2002. Probing questions regarding execution of documents during his tenure at the branch and misusing the same to show that defendant no. 3 stood guarantor of defendant no. 1, were not put to him in cross examination.
Suit No. 141 of 2006 Page no. 13 of 17
17. Defendant no. 3 appears to be an educated person. It is not expected of him to sign a deed of guarantee at the time of applying for said credit facility for his concern. He should have refused to sign such a document at the first place. Although PWs have denied that the signatures on documents were obtained when the same were blank yet the signatory himself cannot seek to shift the blame for so doing. Firstly he should have been aware of the consequences of signing financial papers in blank. If he proceeded ahead with the exercise, it was his duty to ensure within short period thereafter that the documents are duly filled up either by himself or by bank official. Defendant no. 3 does not claim to have been coerced, pressurized or threatened for signing guarantee deed Ex. PW1/5 in blank. He did not take up the matter with superior bank officials to ensure that either the document is filled up to his satisfaction or cancelled. He also did not raise any written protest in this behalf with the plaintiff nor lodge a complaint with local police. The defendant no. 3 is silent about the status of loan taken in the name of M/s. GABS and housing loan taken for himself. It reflects that the belated posture of signatures on Ex. PW1/5 having been taken by the bank officials at the time of getting documents signed from defendant no. 3 in respect of his independent dealings, has been taken by way of afterthought to avoid the liability in this case.
17. Defendant no. 3 has given sermon to plaintiff regarding necessity of lodging a cheating case against defendants no. 1 and 2 with the Suit No. 141 of 2006 Page no. 14 of 17 police. Had the assertions made by him against the bank officials been true, defendant no. 3 certainly would have approached the police for registering a criminal case and got the issue of their collusion/connivance with defendants no. 1 and 2 investigated. The defendant no. 3 thus has utterly failed to establish the element of forgery/fabrication in guarantee deed Ex. PW1/5. Issue is thus decided in negative.
Issue No. 6
18. Although the plea has not been taken in the written statement yet defendant no. 3 apparently feels aggrieved by non filing of criminal case U/s 138 of Negotiable Instruments Act by the plaintiff against defendant no. 1 when the cheque of Rs. 4,00,000/ deposited by him to clear the dues, bounced. He has also resented non initiation of proceedings U/s 13 of SARFAESI Act against the mortgaged property. True that the two actions may have hastened the process of recovery of bank dues but defendant no. 3 having owned joint and several liability by executing deed Ex. PW1/5 can only wish of that the creditor may realize the dues by resorting to actions against borrower and other guarantor sparing him. It was held in Popular Bank Ltd. Vs. United Coir Factory, 1961 Kerala LT 434 that in respect of any debt incurred by the Principal during the currency of guarantee, the surety is liable so long as the debt is recoverable from the principal.
19. Certain blanks in the financial documents have been pointed out by defendant no. 3 during cross examination of PWs which the witnesses Suit No. 141 of 2006 Page no. 15 of 17 have clarified saying that same were not necessary for the type of credit facility granted to defendant no. 1. The plaintiff has maintained statements of account in the usual and ordinary course of its banking business. The statements Ex. PW2/11 to Ex. PW2/14 have duly been proved under Banker's Books Evidence Act, 1891, and therefore generates confidence. The defendant no. 3 on his part never checked the position of loan account by contracting defendant no. 1 nor asked him to regularize it. Having stood guarantor of defendant no. 1, his liability is coextensive with the principal borrower. The financial facility had been granted at concessional rate of interest of 7.5% p.a. with the rider that the borrower will submit export document within stipulated time. Since the borrower failed to comply with the said condition, he was found not entitled to concessional interest and therefore normal rate of interest has been charged. The plaintiff however has failed to produce document stipulating that the higher rate of interest will be charged in the loan account as has been admitted by PW2. Neither the RBI guidelines providing charge of higher rate of interest on non fulfilling of any such conditions has been proved nor the normal rates of interest prevailing from time to time specified.
20. PW2 has admitted that no transactions in an account which has been declared nonperforming asset, are allowed except for reversal of interest and recovery of bank dues. Even then the borrower was allowed to withdraw a sum of Rs. 1,50,000/ in cash from the N.P. A. Account under Suit No. 141 of 2006 Page no. 16 of 17 Ex. PW1/35 and Ex. PW1/37. The witness could not offer any explanation in this behalf but the two referred letters are quite clear in themselves. The operation of NPA account was authorized by Superior Bank officers taking into account the repeated promises of defendant no. 1 of not only depositing this amount but the further sum of Rs. 5,00,000/ by 15.05.2004. It reflects that the superior officers of bank were closely monitoring the subject loan account. There decision to allowed cash withdrawal from NPA Account in the peculiar facts must be deemed to be financial interest of all concerned and deserves respect. Defendant no. 3 having failed to keep a close eye over the account must have sounded the Superior bank officers at relevant stage instead of pointing out the omissions on being caught on the wrong foot.
21. The plaintiff thus is entitled to recover the principal amount of Rs. 4,25,036/ and Rs. 1,150/ found outstanding in current account of defendant no. 1, from the defendants with interest @ 7.5% p.a. from 01.10.2003 when the account was declared nonperforming till the date of filing of suit. The cumulative amount will further carry interest at the same rate from the date of filing of the suit till realization. Issue is decided accordingly.
Issue No. 7
20. Defendant no. 2 as a guarantor of defendant no. 1 is jointly and severally liable to pay the outstanding amount to plaintiff. She had secured the amount by creating equitable mortgage in respect of her freehold plot of Suit No. 141 of 2006 Page no. 17 of 17 land no. 122(New No. B37) measuring 380 sq. yds. situated in Azad Nagar, Block C, Banarsi Das Scheme inside Shahdara Municipal Committee, Shahdara, Delhi in Khasara No. 175/88, Khewat No. 4, Khatoni No. 77, within the area of Village Ghondli, Delhi. Preliminary decree under Order XXXIV CPC in respect thereof is passed. In case the defendants do not make payment of the decreetal amount to the plaintiff within a period of three months, the plaintiff shall be entitled to apply for final decree of sale of the mortgaged property to realize the same.
Issue No. 8
21. In view of the above analysis, suit is hereby decreed in favour of the plaintiff and against the defendants in the sum of Rs. 4,26,186/ with interest @ 7.5% p.a. from 01.10.2003 when the account was declared non performing till the date of filing of suit. The cumulative amount will further carry interest at the same rate from the date of filing of the suit till realization. The plaintiff is further entitled to proportionate costs of the suit. Preliminary decree in respect of the mortgaged property is passed. In case the defendants do not pay the decreetal amount within three months hereof, the plaintiff shall be entitled to apply for final decree of sale of the mortgaged property for realizing its dues.
Decree sheet be prepared.
Announced in the open court
on 14th July, 2011
Suit No. 141 of 2006 Page no. 18 of 17
(Sunil K. Aggarwal)
Addl. District Judge (C)10
Delhi
Suit No. 141 of 2006 Page no. 19 of 17
Suit No. 141/2006
14.07.2011
5.30 p.m.
Present: None for the parties.
None for the plaintiff could make it convenient to address arguments in this case although the matter was kept in wait since morning. After going through the file the judgment has directly been dictated on the computer whereby suit is decreed in favour of the plaintiff and against the defendants with preliminary decree in respect of the mortgaged immovable property and proportionate costs.
Decree sheet be prepared.
Put up on 24.10.2011 for report about payment received by the plaintiff.
(Sunil K. Aggarwal)
Addl. District Judge (C)10
Delhi: 14.07.2011
Suit No. 141 of 2006 Page no. 20 of 17