Delhi District Court
Canara Bank vs Vikram And Anr on 8 August, 2025
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IN THE COURT OF MS NEELAM SINGH,
DISTRICT JUDGE (COMMERCIAL)-06, CENTRAL, TIS
HAZARI COURTS, NEW DELHI
CS (COMM) No. 63/2025
In the matter of:
Canara Bank,
A body corporate constituted
under the Banking Companies
(Acquisition and Transfer of Undertaking) Act, 1970,
Having its head office at-
6648, 112, JC Road,
P.B. Halsurpete, Bengaluru, Karnataka-560001
Branch Office at:-
4 Raj Niwas, Civil Line,
New Delhi-110054.
........ Plaintiff
Versus
1. Sh. Vikram (Borrower)
R/o 158/C, Gali No.10, Ambedkar Basti,
Delhi-110053.
2. Sh. Durgesh (Guarantor)
R/o 12-A, 2 Shri Ram Marg, Maujpur,
Delhi-110053.
......Defendants
Date of institution of suit : 15.01.2025
Judgment reserved on : 08.08.2025
Date of Judgment : 08.08.2025
Final Decision : Decreed
JUDGMENT
CS (Comm) 63/2025 Canara Bank Vs. Vikram and Anr. Page 1 of 25
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Case of the plaintiff
1. This commercial suit has been filed by Canara Bank, a Body Corporate, constituted under the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970, through Sh. Shanker Prasad, Branch Manager of the plaintiff for recovery of a sum of Rs.5,15,214/- alongwith interest pendente lite and future.
2. It is the case of the plaintiff that defendant no.1, Sh. Vikram, approached the plaintiff bank and requested for availing a term loan of Rs.5,30,000/-. Defendant no.2, Sh. Durgesh, stood as a surety/Guarantor for the loan advanced to defendant no.1. Thereafter, plaintiff bank executed the Agreement for term loan dated 10.06.2021 and a loan amount of Rs.5,30,000/- was sanctioned and disbursed to defendant no.1. Defendant no.1 undertook to pay the loan in 60 monthly installments of Rs.11,603/- each. It is submitted that at the time of sanction of loan, defendant no.1 executed the required documents and signed acknowledgment of debt and security on 10.05.2024. After availing the loan, defendant no.1 failed to repay the due loan amount and maintain financial discipline and breached the terms and conditions as stipulated in the Loan Agreement. Consequently, on 11.05.2023, the account of the defendant no.1 was declared as 'Non-Performing Asset'. It is submitted that defendant no.1 being the borrower and defendant no.2 being the Guarantor are jointly and severely liable for the outstanding amount to be paid to the plaintiff. It is further submitted that a demand notice has been sent to the CS (Comm) 63/2025 Canara Bank Vs. Vikram and Anr. Page 2 of 25 :3: defendant by the plaintiff bank on 08.01.2024, but the defendants did not make the payment.
3. It is further submitted that plaintiff bank maintained regular Books of Accounts in the ordinary and regular course of its business and as per the said Books of Accounts, the defendants are liable to make the payment of Rs.5,15,214/- (the details of this amount have been mentioned in para no.11 of the plaint) and hence, the present suit.
Case of the defendants
4. Summons in the suit were issued upon both the defendants. Both the defendants were duly served on 31.01.2025. Both the defendants have contested the present suit by filing written statement jointly without filing any documents on record. It is submitted that this Court has no territorial jurisdiction to try and entertain the present suit as both the defendants are resident of Ambedkar Basti, Gonda and all the transactions pertaining to the loan in question have taken place in Ambedkar Basti, Gonda, U.P. It is submitted that no part of cause of action has ever arisen in the territorial jurisdiction of this Court. It is further submitted that because one of the branches of the plaintiff bank is situated in Civil Lines, this Court does not confer jurisdiction under Section 20 of CPC. It is further submitted that the suit is barred by limitation as the loan was granted on 10.06.2021 and the present suit has been CS (Comm) 63/2025 Canara Bank Vs. Vikram and Anr. Page 3 of 25 :4: filed in January, 2025 after the expiry of stipulated period of three years. It is further submitted that there is no acknowledgment of liability within the limitation period under Section 18 of the Limitation Act, hence, the suit deserves dismissal being time barred. It is further submitted that the defendants are working as Sweeper and not educated enough, the plaintiff bank has obtained the signatures of the defendants on blank and incomplete documents at the time of disbursal of loan. It is submitted that the defendants were made to sign the documents without being provided copies or being informed of the terms and conditions and accordingly, the terms and conditions are not binding upon the defendants. It is further submitted that the rate of interest as charged by the plaintiff bank to the tune of 13.65% per annum is arbitrary, excessive and penal in nature and violates the RBI guidelines and, accordingly, the bank is not entitled to recover any sum from the defendants. It is further submitted that the plaintiff bank has failed to serve a prior and valid notice of demand prior to filing of the present suit and hence, the suit is liable to be dismissed. It is further submitted that liability of defendant no.2 as Guarantee stands discharged due to plaintiff's failure to invoke the Guarantee in a timely manner and, accordingly, the defendant no.2 is not liable to make any payment to the bank. The case of the plaintiff has been denied in toto by the defendants.
CS (Comm) 63/2025 Canara Bank Vs. Vikram and Anr. Page 4 of 25 :5:Issues
5. No replication has been filed by the plaintiff. On the basis of pleadings of the parties, following issues have been framed by Ld. Predecessor of this Court on 25.04.2025:
(i) Whether the plaintiff is entitled to a sum of Rs.
5,15,214.33/- together with pendente lite and future interest @ 13.65 % per annum, on account of non- repayment of the loan? OPP
(ii) Whether the suit is within limitation? OPP
(iii) Whether this Court has territorial jurisdiction to try and enter the present suit? OPP
(iv) Whether the plaintiff has complied with Section 12-A of the Commercial Courts Act? OPP
(v) Whether no cause of action has accrued to the plaintiff for filing the present suit? OPD
(vi) Whether the defendant have not signed any documents or were made to sign the documents without provision of copies? OPD
(vii) Whether the interest being charged by the plaintiff bank is excessive and arbitrary? OPD
(viii) Whether defendant no. 2 stands discharged from his capacity as the Guarantor on account of act of omission on the part of the plaintiff bank? OPD
(ix) Relief.
Plaintiff's evidence
6. In order to substantiate its case, the plaintiff has examined its Branch Manager Sh. Shankar Prasad as PW-1 by way CS (Comm) 63/2025 Canara Bank Vs. Vikram and Anr. Page 5 of 25 :6: of affidavit. The witness tendered the following documents:-
1. General Power of Attorney as Ex. PW 1/1 .
2. Loan Application with defendant's documents as Ex.
PW 1/2.
3. Pronote as Ex. PW 1/3.
4. Approval of Loan as Ex. PW 1/4 .
5. Notice dated 08.01.2024 as Ex. PW 1/5.
6. AOD Dated 18.05.2024 as Ex. PW 1/6.
7. Legal Notice dated 24.06.2024 with postal receipt as Ex. PW 1/7 .
8. Notice dated 18.09.2024 as Ex. PW 1/8.
9. Statement of Account as Ex. PW 1/9 .
10. Non-Starter Report as Ex. PW 1/10.
7. PW-1 was cross-examined by Ld. Counsel for defendants and in his cross-examination, PW-1 has deposed that the rate of interest on the loan amount has been mentioned in the documents. The rate of interest varies as per RLLR Policy. (Lending rate). There is no requirement of any Authority Letter to be given by the person who was officiating at the time of grant of loan in the Bank, to me. The plaintiff bank has verified the work place of the defendant alongwith salary of the defendant. Salary slip of the defendant has been placed on record. The contents of the salary slip placed on record are matter of records. Thereafter, P.E. was closed.
Defendant's evidence
8. Defendant examined Mr. Vikram as DW-1 and deposed CS (Comm) 63/2025 Canara Bank Vs. Vikram and Anr. Page 6 of 25 :7: that he has taken loan from the Bank and initially made the payment of the loan amount of around Rs.1.5-1.75 lakhs. Thereafter, due to personal difficulties and also on account of wedding of his sister, he took other loans from the market and the rates of interest for the loans were very high. During deposition, he undertook to make the payment provided some easy installments may be made. He was also suffering severe diabetes and prayed for waiving of interest amount.
9. DW-1 was cross-examined by Ld. Counsel for plaintiff and during his cross-examination, DW-1 has deposed that he was getting a monthly salary of Rs.53,000/- per month. However, he was not aware about his gross salary. He has admitted that he took loan from bank. He has admitted that he had visited the bank to sign the documents of the loan. He deposed that the contents of the loan documents were not read over to him by the staff of the bank. He has denied the suggestion that the signatures on blank papers have been obtained by the bank. He has admitted that he has not made any complaint against the bank for obtaining his signatures on blank papers. The payments made by him to the bank are a matter of record. Thereafter, D.E. was closed.
Final Arguments
10. It is submitted by Ld. Counsel for the plaintiff that this Court has the jurisdiction to try and entertain the present suit. The loan was sanctioned and disbursed from the plaintiff bank's branch located within the jurisdiction of this Court. Therefore, a part of the cause of action has arisen here. As per Section 20(c) CPC, even a part of cause of action is sufficient to confer territorial jurisdiction.
CS (Comm) 63/2025 Canara Bank Vs. Vikram and Anr. Page 7 of 25 :8:11. It is further submitted that the suit is not barred by limitation.
The loan was sanctioned on 10.06.2021 and the account was declared 'NPA' on 11.05.2023. The borrower signed an Acknowledgment of Debt and Security on 10.05.2024, which is within the limitation period. As per Section 18 of the Limitation Act, acknowledgment of liability resets the limitation period. Hence, the suit filed in January 2025 is well within time.
12. It is submitted that defendant no.1 had approached the plaintiff bank for a term loan and after completing all formalities, a sum of Rs. 5,30,000/- was disbursed to him. Defendant no.2 stood as the guarantor. All loan documents were duly signed by both defendants. The execution of the loan documents and the disbursal of funds are not denied by the defendants. Hence, the liability of the borrower and guarantor is clearly established.
13. It is argued that both defendant no.1 (borrower) and defendant no.2 (guarantor) are jointly and severally liable for the repayment of the loan. The guarantor has executed the guarantee agreement and has not disputed his signature. As per settled law, once the borrower defaults, the guarantor becomes equally liable to repay the outstanding dues.
14. It is submitted that the allegations made by the defendants regarding signing blank papers or not being informed of the terms are false and baseless. Defendant no.1 himself admitted in cross-examination that he signed the documents at the bank and made no complaint against the bank. There is no documentary proof or complaint to support the allegation of coercion or fraud. Hence, these claims are afterthoughts and CS (Comm) 63/2025 Canara Bank Vs. Vikram and Anr. Page 8 of 25 :9: deserve no consideration.
15. It is further submitted that the plaintiff bank has issued valid legal notices and demand notices to the defendants before filing the suit. Copies of these notices have been placed on record and exhibited. The defendants have failed to act on these notices. Hence, the requirement of demand, prior to suit filing, has been duly fulfilled.
16. It is submitted that the rate of interest charged is not arbitrary or excessive. The loan was sanctioned with interest linked to the RLLR (Repo Linked Lending Rate), which is a floating rate as per RBI norms. The borrower was fully informed of this. Hence, there is no violation of RBI guidelines, and the plaintiff bank is entitled to charge the agreed rate of interest.
17. It is further submitted that defendant no.1 has signed an Acknowledgment of Debt on 10.05.2024, which clearly shows that he accepted his liability. This acknowledgment is admissible under Section 18 of the Limitation Act and extends the limitation period. It proves that the defendants were well aware of the outstanding dues.
18. It is argued that the plaintiff has maintained regular books of accounts and a detailed statement of account has been filed on record. This document clearly shows the disbursement, EMIs paid, default, and the final outstanding amount of ₹5,15,214/-. The statement has not been specifically denied or rebutted by the defendants. Therefore, it is reliable and supports the plaintiff's claim.
19. Lastly, it is submitted that defendant no.1 himself admitted in CS (Comm) 63/2025 Canara Bank Vs. Vikram and Anr. Page 9 of 25 : 10 : his deposition that he took the loan and could not repay due to personal reasons. He also admitted to paying about ₹1.5-1.75 lakhs and prayed for easy installments. This admission further strengthens the plaintiff's case and shows that the liability exists and is not disputed.
20. In view of the above, it is submitted that the suit of the plaintiff deserves to be decreed for a sum of Rs. 5,15,214/- along with interest pendente lite and future interest, as prayed in the plaint, and costs of the suit.
21. On the other hand, it is submitted by Ld. Counsel for the defendants that this Court does not have territorial jurisdiction to try the present suit. Both defendants are residents of Ambedkar Basti, Gonda, U.P., and all loan- related transactions, including the application, disbursement, and execution of documents, took place in Gonda. Merely because the plaintiff bank has a branch in Civil Lines does not confer jurisdiction. As per Section 20 CPC, no part of the cause of action has arisen within the jurisdiction of this Court, and hence the suit deserves dismissal on this ground alone.
22. It is further submitted that the present suit is hopelessly time-barred. The loan was sanctioned on 10.06.2021 and, as per the plaintiff's own case, the account was declared NPA on 11.05.2023. The suit has been filed in January 2025, after more than 3 years from the date of disbursement and more than 1.5 years after the account became NPA. No acknowledgment of debt was made by the defendants within the limitation period. The alleged CS (Comm) 63/2025 Canara Bank Vs. Vikram and Anr. Page 10 of 25 : 11 : Acknowledgment of Debt dated 10.05.2024 is outside the original limitation period and cannot revive the cause of action. Hence, the suit is liable to be dismissed under the Limitation Act.
23. It is submitted that the defendants are illiterate persons working as sweepers. They were not explained the terms and conditions of the loan properly. The bank staff obtained their signatures on blank or incomplete documents at the time of disbursal. Copies of the signed documents were never provided to them. There was clear imbalance in the bargaining power and no proper consent was obtained, which renders the agreement unfair and not binding.
24. It is further argued that the plaintiff bank has not complied with fair practices required under RBI Guidelines. The rate of interest charged at the rate of 13.65% per annum is arbitrary, excessive, and penal in nature. The defendants were in no position to negotiate such a high rate and were not informed about its variation under the RLLR system. This conduct is exploitative and violates principles of natural justice and equity.
25. It is submitted that the liability of defendant no.2 as a guarantor stands discharged. The plaintiff bank did not invoke the guarantee within a reasonable time or issue any specific notice to the guarantor. As per law, when the creditor fails to take timely steps to enforce the guarantee, the surety is discharged from liability. The plaintiff has CS (Comm) 63/2025 Canara Bank Vs. Vikram and Anr. Page 11 of 25 : 12 : been negligent in pursuing the guarantor and hence cannot hold him liable now.
26. It is further submitted that the plaintiff failed to serve a proper and valid demand notice before filing the suit. The demand notice dated 08.01.2024 has not been proven to have been duly served or acknowledged. A valid notice is a necessary condition before approaching the court. The failure to serve such notice violates legal procedure and makes the suit premature.
27. It is argued that the statement of account filed by the plaintiff cannot be blindly relied upon. It has not been duly certified under the Bankers' Books Evidence Act. Moreover, no break-up or detailed calculation has been provided for the claimed amount of Rs. 5,15,214/-. There is no clarity on the amount repaid, interest charged, penalties imposed, or fees deducted. Hence, the claimed amount is disputed and not conclusively proven.
28. It is submitted that defendant no.1 has already made payments amounting to Rs. 1.5 to Rs. 1.75 lakhs, which has not been properly accounted for by the bank. This shows that there was no complete default and the defendant had the intention to repay. However, due to personal and family hardships, including his sister's wedding and medical issues, he could not continue the payments. The bank has shown no flexibility and has instead rushed to court.
CS (Comm) 63/2025 Canara Bank Vs. Vikram and Anr. Page 12 of 25 : 13 :29. It is further submitted that defendant no.1 is ready and willing to settle the matter if easy and reasonable installments are allowed and the excessive interest is waived. This shows bonafide intention on part of the borrower and willingness to resolve the matter. A harsh decree will only worsen the financial condition of the defendants.
30. In view of the above facts and legal submissions, it is humbly submitted that the present suit is not maintainable on grounds of lack of jurisdiction, limitation, absence of valid notice, and violation of banking norms. The plaintiff has not approached this Court with clean hands. Therefore, the suit deserves to be dismissed with costs.
Issue wise findings
(iii) Whether this Court has territorial jurisdiction to try and enter the present suit? OPP
31. The onus to prove this issue was on the plaintiff. It is the case of the plaintiff that the loan in question was sanctioned and disbursed by the plaintiff bank through its branch located at 4, Raj Niwas Marg, Civil Line, New Delhi which is within the jurisdiction of this Court. It is further stated that the defendants approached the plaintiff bank and submitted loan documents in the said branch. The loan was processed and disbursed from the aforesaid branch office of the plaintiff bank which falls within the territorial jurisdiction of this Court.
CS (Comm) 63/2025 Canara Bank Vs. Vikram and Anr. Page 13 of 25 : 14 :32.The defendants, on the other hand, have taken the objection that both of them are residents of Gonda, U.P., and all transactions related to the loan took place at Gonda. It is further submitted by the defendants that merely because one of the branches of the plaintiff bank is situated within this Court's jurisdiction, the same does not confer territorial jurisdiction.
33.However, the said contention of the defendants is without merit. As per Section 20(c) of the Code of Civil Procedure, 1908, a suit can be instituted in a Court within the local limits of whose jurisdiction the cause of action, wholly or in part, arises. It is well-settled law that even if a part of the cause of action arises within the territorial limits of the Court, the Court will have jurisdiction to entertain the suit.
34.In the present case, the loan was sanctioned and disbursed by the plaintiff bank's branch located within the territorial jurisdiction of this Court. The documents placed on record by the plaintiff, including the Loan Application (Ex. PW 1/2), Loan Approval (Ex. PW 1/4), and related records clearly show that the loan processing and account opening were done from this branch. These facts are not specifically denied by the defendants.
35.Reliance may be placed on the judgment of the Hon'ble Supreme Court in ABC Laminart Pvt. Ltd. v. A.P. Agencies, (1989) 2 SCC 163, wherein it was held that CS (Comm) 63/2025 Canara Bank Vs. Vikram and Anr. Page 14 of 25 : 15 : when a part of the cause of action arises at a place, the Court at that place will have jurisdiction to entertain the suit. Therefore, considering the undisputed fact that the loan was sanctioned and disbursed from a branch falling within this Court's jurisdiction, and applying the settled legal position under Section 20(c) CPC, this Court holds that it has the territorial jurisdiction to entertain and try the present suit. Accordingly, this issue is decided in favour of the plaintiff and against the defendants.
Issue No. (ii): Whether the suit is within limitation? OPP
36.The burden to prove this issue was on the plaintiff. It is the case of the plaintiff that the present suit has been filed well within the prescribed period of limitation. The loan was sanctioned and disbursed on 10.06.2021, and the suit was filed in January 2025. The plaintiff also relies on an Acknowledgment of Debt signed by defendant no.1 on 10.05.2024 to support that the limitation was extended.
37.On the other hand, the defendants have argued that the suit is barred by limitation. It is their case that the limitation period of three years started from the date of loan disbursement, i.e., 10.06.2021, and ended in June 2024. According to the defendants, the acknowledgment of debt dated 10.05.2024 does not help the plaintiff as it was signed after the limitation period had already expired.
38.It is a settled law that a suit for recovery of money is governed by Article 113 of the Limitation Act, and the CS (Comm) 63/2025 Canara Bank Vs. Vikram and Anr. Page 15 of 25 : 16 : limitation period is three years from the date when the right to sue arises. In loan matters, the right to sue generally arises when the borrower commits default in payment of the installments. In this case, the loan was to be repaid in 60 monthly installments, and the first installment would have been due around July 2021. Therefore, in the normal course, the limitation period would have expired in July 2024.
39.However, the Hon'ble Supreme Court had passed general order in Suo Motu Writ Petition (Civil) No. 3 of 2020 due to the COVID-19 pandemic, which extended the limitation period for all cases. As per the directions of the Hon'ble Supreme Court, the period from 15.03.2020 to 28.02.2022 was ordered to be excluded from computing the limitation period. This means that around 714 days (or about 1 year and 11 months) would not be counted while calculating limitation.
40.If we exclude this period from the normal limitation calculation, the limitation period which was supposed to end in July 2024 now stands extended up to around March, 2025. Therefore, the suit filed in January 2025 is clearly within the extended limitation period.
41.Even otherwise, the Acknowledgment of Debt signed by defendant no.1 on 10.05.2024 gives a fresh period of limitation under Section 18 of the Limitation Act, as it was made before the extended limitation period expired. This further supports the case of the plaintiff.
CS (Comm) 63/2025 Canara Bank Vs. Vikram and Anr. Page 16 of 25 : 17 :42.In view of the exclusion granted by the Hon'ble Supreme Court during COVID-19, and the acknowledgment of liability signed by the defendant, I am of the view that the suit is within limitation. This issue is accordingly decided in favour of the plaintiff and against the defendants.
(iv) Whether the plaintiff has complied with Section 12-A of the Commercial Courts Act? OPP
43. Section 12A of the Commercial Courts Act, 2015, mandates pre-institution mediation for commercial disputes before a suit can be filed, unless urgent interim relief is needed. This means parties must attempt to resolve the dispute through mediation before approaching a court. The mediation process, as per the Commercial Courts (Pre-Institution Mediation and Settlement) Rules, 2018, should be completed within three months, with a possible extension of two months with mutual consent. Settlements reached through this process are legally binding and have the effect of an arbitral award.
44. In the present case, plaintiff has filed and proved on record the copy of Non-Starter Report dated 30.11.2024 (Ex. PW 1/10) issued by Central District Legal Services Authority. It is mentioned in the report that notices were issued to the respondents on the addresses given by the applicant for 21.09.2024 & 06.11.2024 for obtaining consent to participate in mediation process. Sh. Vaibhav Rai Gupta, Ld. Counsel for the applicant was present on CS (Comm) 63/2025 Canara Bank Vs. Vikram and Anr. Page 17 of 25 : 18 : the above mentioned dates. The respondents did not turn up. Therefore, the present matter was stated as Non- Starter. Accordingly, on the basis of above discussion, I am of the considered opinion that the plaintiff has duly complied with the provisions of Section 12A of Commercial Courts Act, 2015.
(v) Whether no cause of action has accrued to the plaintiff for filing the present suit? OPD
(vi) Whether the defendant have not signed any documents or were made to sign the documents without provision of copies? OPD
45.These two issues are being decided together as they are interconnected. The question of whether any cause of action arose in favour of the plaintiff (Issue no. v) directly depends on whether valid and enforceable documents were executed by the defendants (Issue no. vi). If the defendants had not executed any loan documents, or if those documents were obtained improperly or without free consent, then it could be argued that no valid cause of action has arisen. On the other hand, if the documents were properly signed and the loan was disbursed, then the plaintiff would have a valid cause of action for recovery.
46.In the present case, it is the specific case of the plaintiff that defendant no.1 applied for a term loan, the loan was sanctioned and disbursed on 10.06.2021, and both defendants signed all necessary documents. The plaintiff has placed on record the Loan Application (Ex. PW 1/2), CS (Comm) 63/2025 Canara Bank Vs. Vikram and Anr. Page 18 of 25 : 19 : Promissory Note (Ex. PW 1/3), Loan Sanction Letter (Ex. PW 1/4), and Acknowledgment of Debt (Ex. PW 1/6), among other documents. The plaintiff has also examined PW-1, the Branch Manager, who has deposed on oath that all procedures were followed at the time of disbursement.
47.On the other hand, the defendants have taken the defence that they were made to sign blank or incomplete documents and were not given any copies of the signed documents. However, in his cross-examination, defendant no.1 (DW-1) clearly admitted that he had taken the loan, had visited the bank for signing the documents, and had not filed any complaint before any authority alleging misuse of his signatures or misrepresentation. He also admitted to having made part payment of around Rs. 1.5- 1.75 lakhs towards the loan. This shows that the defendants were aware of the loan and participated in the transaction knowingly.
48.The defendants' general denial and vague allegation that the documents were signed under ignorance or without proper explanation are not supported by any cogent evidence. No complaint, affidavit, or witness has been brought on record to support the allegation of fraud or misrepresentation. The documents placed on record by the plaintiff bear the signatures of the defendants and are part of regular bank records maintained in the ordinary course of business. Hence, these documents cannot be disregarded merely on the basis of oral denials.
CS (Comm) 63/2025 Canara Bank Vs. Vikram and Anr. Page 19 of 25 : 20 :49.Once the defendants have admitted receiving the loan and have also made partial repayments, their challenge to the validity of the documents loses credibility. The existence of a written loan agreement, execution of documents, and the disbursement of funds clearly establish that a cause of action arose in favour of the plaintiff when the defendants defaulted in repayment. The plaintiff was thus justified in approaching this Court for recovery.
50. Accordingly, it is held that the plaintiff has a valid and enforceable cause of action to file the present suit, and the defendants have in fact signed the relevant documents at the time of loan disbursal. There is no material to prove that the signatures were obtained on blank documents or that the defendants were unaware of the terms. Both the issues are, therefore, decided in favour of the plaintiff and against the defendants.
(viii) Whether defendant no. 2 stands discharged from his capacity as the Guarantor on account of act of ommission on the part of the plaintiff bank? OPD
51.The burden to prove this issue was on the defendants. It is the defence of defendant no.2 that he stood as a guarantor for the loan availed by defendant no.1 but has now been discharged from his liability due to acts of omission and negligence by the plaintiff bank. It is specifically alleged that the bank failed to invoke the guarantee in a timely manner and did not issue any proper notice to the guarantor prior to filing of the present suit. It is submitted CS (Comm) 63/2025 Canara Bank Vs. Vikram and Anr. Page 20 of 25 : 21 : that due to these lapses, the guarantor's liability stands extinguished.
52.On the other hand, the plaintiff has submitted that defendant no.2 voluntarily signed the loan documents as guarantor, and the guarantee was a continuing one, covering the entire liability of the principal borrower. The plaintiff has also issued a legal notice dated 24.06.2024 (Ex. PW 1/7) addressed to both defendants, including the guarantor. It is the case of the plaintiff that no special or separate invocation is required in such suits where both the principal borrower and the guarantor have been sued jointly.
53.In loan agreements, the liability of the guarantor is co-
extensive with that of the principal debtor, unless otherwise agreed. This is the settled position under Section 128 of the Indian Contract Act, 1872, and has been reiterated by the Hon'ble Supreme Court in State Bank of India v. Indexport Registered, (1992) 3 SCC 159, where it was held that the liability of the surety is immediate and not dependent on the creditor first proceeding against the principal debtor.
54.In the present case, the guarantor has not denied his signatures on the loan documents, nor has he disputed that he stood as surety. There is no material on record to show that the guarantee was revoked or that the bank had made any commitment to release the guarantor. Further, there is no evidence of any conduct on part of the bank that CS (Comm) 63/2025 Canara Bank Vs. Vikram and Anr. Page 21 of 25 : 22 : prejudiced the legal position of the guarantor or discharged him under law.
55.Mere delay in filing the suit or non-separate invocation of the guarantee does not, by itself, discharge the guarantor from liability. In fact, the suit has been filed jointly against both the borrower and the guarantor, which is sufficient for enforcement of the guarantee. Also, the legal notice dated 24.06.2024 clearly shows that demand was raised against both defendants, including defendant no.2.
56.There is also no pleading or proof that any variation of the contract or loan terms was made without the guarantor's consent. Hence, none of the exceptions under Sections 133 to 139 of the Indian Contract Act, which deal with situations where a surety may be discharged, are attracted in the present case. In view of the above discussion, and in the absence of any act of omission or prejudice caused by the bank to defendant no.2, I find no merit in the claim that defendant no.2 stands discharged from his capacity as guarantor. Accordingly, this issue is decided in favour of the plaintiff and against the defendants.
(i) Whether the plaintiff is entitled to a sum of Rs. 5,15,214.33/- together with pendente lite and future interest @ 13.65 % per annum, on account of non- repayment of the loan? OPP
(vii) Whether the interest being charged by the plaintiff bank is excessive and arbitrary? OPD CS (Comm) 63/2025 Canara Bank Vs. Vikram and Anr. Page 22 of 25 : 23 :
57. The burden to prove this issue was on the plaintiff. It is the case of the plaintiff bank that defendant no.1 availed a term loan of Rs. 5,30,000/- from the plaintiff on 10.06.2021 and agreed to repay the same in 60 equal monthly installments of Rs. 11,603/- each. Defendant no.2 stood as guarantor for the said loan. However, after availing the loan, defendant no.1 defaulted in repayment and failed to maintain financial discipline. The account was eventually classified as Non-Performing Asset (NPA) on 11.05.2023. As per the statement of account filed by the bank (Ex. PW 1/9), the outstanding amount due as on the date of filing of the suit was Rs.5,15,214.33/-. The plaintiff has prayed for recovery of this amount along with pendente lite and future interest at the rate of 13.65% per annum.
58.To prove its case, the plaintiff examined PW-1, the Branch Manager, who produced the relevant loan documents, including the loan application (Ex. PW 1/2), promissory note (Ex. PW 1/3), loan sanction letter (Ex. PW 1/4), and statement of account (Ex. PW 1/9). The witness was duly cross-examined but nothing material was brought out to discredit the plaintiff's documents or claim.
59.The defendants, in their written statement and deposition, have admitted that the loan was taken by defendant no.1 and that he made part payments of around Rs. 1.5-1.75 lakhs. However, they have failed to produce any evidence to show that the full loan was repaid or that the bank has CS (Comm) 63/2025 Canara Bank Vs. Vikram and Anr. Page 23 of 25 : 24 : made incorrect calculations. The exact amount repaid by defendant no.1 has been reflected in the statement of account, and the final outstanding balance of Rs. 5,15,214.33/- stands unrebutted.
60.Regarding the interest claimed by the plaintiff at the rate of 13.65% per annum, the same is stated to be as per the agreed terms of the loan, which were accepted by the borrower at the time of sanction. The documents on record confirm that the rate of interest was floating and linked to the RLLR policy of the bank. Though the defendants have contended that the interest is excessive or penal, they have not brought any material to show that the interest charged violates RBI guidelines or the loan terms. In the absence of any such proof, the interest rate agreed between the parties must be respected.
61.However, considering that the matter is now before the Court, and balancing the principles of justice and fairness, this Court is of the view that while the plaintiff is entitled to recover the outstanding principal and interest till the date of filing, the pendente lite and future interest should be granted at a reasonable rate, rather than the contractual rate. Courts routinely award a lower rate of interest for pendente lite and future periods under Section 34 of the CPC. In this case, a rate of 6% per annum (simple interest) is considered fair and just. Accordingly, it is held that the plaintiff is entitled to recover a sum of Rs. 5,15,214.33/- from the defendants, jointly and severally, along with pendente lite and future interest @ 6% per CS (Comm) 63/2025 Canara Bank Vs. Vikram and Anr. Page 24 of 25 : 25 : annum from the date of filing of the suit till realization.
Relief
62. In view of the findings on the above issues, the suit of the plaintiff is hereby decreed for a sum of Rs. 5,15,214.33/- along with pendente lite and future interest @ 6% per annum from the date of filing of the suit till realization, in favour of the plaintiff and against the defendants, who shall be jointly and severally liable to pay the same. Considering the financial condition of the defendants as reflected in the evidence and the willingness shown by defendant no.1 to repay the dues, it is further directed that the plaintiff bank shall prepare a schedule of easy monthly installments for repayment of the decreed amount along with interest, and communicate the same to the defendants within four weeks from the date of this judgment. The defendants shall commence payment as per the said schedule within two weeks thereafter. No order as to costs. Decree sheet be drawn and file be consigned to Record Room after due compliance.
Announced & dictated Digitally signed by NEELAM NEELAM SINGH SINGH in the open Court on this Date:
2025.08.16 15:44:00 +0530 08th Day of August, 2025 (NEELAM SINGH) District Judge (Commercial Court-06) Central, Tis Hazari Courts, Delhi CS (Comm) 63/2025 Canara Bank Vs. Vikram and Anr. Page 25 of 25