Andhra HC (Pre-Telangana)
Radha Agencies And Ors. vs Vijaya Bank on 21 September, 2001
Equivalent citations: AIR2002AP91, [2004]121COMPCAS477(AP), AIR 2002 ANDHRA PRADESH 91, (2002) 2 CIVILCOURTC 421, (2002) 1 ANDHWR 117, (2004) 121 COMCAS 477, (2003) 1 BANKCLR 321
Author: Bilal Nazki
Bench: Bilal Nazki, E. Dharma Rao
JUDGMENT Bilal Nazki, J.
1. The plaintiff filed a suit for a preliminary and final decree for sale of the plaint 'B' schedule mortgaged property of the defendants 2, 6 and 7 and for recovery of Rs. 4,92,387.50 ps. against the defendants. The Court passed a decree that the defendant shall pay a sum of Rs. 5,17,441.10 ps with subsequent interest on Rs. 4,92,387.50 ps @ 12% per annum from 19-1-1989, the date of the suit, till the date of realization. The Court also passed a decree that on such payment the plaintiff shall bring into Court all documents in his possession or power relating to the mortgaged property and clear off the said mortgaged property from all encumbrances created by the plaintiff or any person claiming under him and deliver to the defendant peaceful possession of the said property. The Court also ordered that, in default of payment by the defendant the plaintiff may apply to the Court for a final decree for sale of the mortgaged property and on such application the property shall be directed to be sold and for this purpose the plaintiff shall produce before the Court or such officer as it appoints all documents in his possession or power relating to the mortgaged property. The Court also gave the liberty to the plaintiff to apply for a personal decree against the defendant if the money realised by such sale is not sufficient to payment in full satisfaction of the amount due to the plaintiff. This judgment and decree has been challenged by way of this appeal.
2. The suit was based by the Bank on the fact that the defendants approached the Bank for open loan cash credit facility and the plaintiff Bank granted the loan to the extent of Rs. 2,50,000/- subject to the terms and conditions laid down by the plaintiff Bank. Defendants 1 to 5 executed a promissory note on 20th January, 1986 for Rs. 2,50,000/- undertaking to pay the said amount with interest @ 7.5% per annum over the Reserve Bank of India rate with minimum of 17.5% per annum with quarterly rests for the value received. Defendants 1 to 5 also executed an agreement for demand cash credit on the hypothecation of movable property on the same day i.e., 20th January, 1986 hypothecating the stock of various varieties of fertilizers and pesticides stored in their shop at PP Road godowns. The 6th defendant is the wife of the second defendant and the 7th defendant is father of the second defendant. They created an equitable mortgage against the properties described in 'B' schedule by depositing title deeds and other documents mentioned in 'A' schedule for repayment of the loan advanced and to be advanced and Bank guarantee by the plaintiff to the defendants 1 to 5. The defendants availed the said loan facilities. Subsequently at the instance of defendants 1 to 5 the plaintiff enhanced the loan facility from Rs. 2,50,000/ - to Rs. 3,00,000/- to the defendants 1 to 5. The defendants executed another promissory note for Rs. 50,000/- on 30-10-87 adhering the conditions with regard to interest etc., therein. The defendants 2, 6 and 7 also consented for the continuation of equitable mortgage against the 'B' schedule property for the additional loan facility provided to the defendants 1 to 5. Therefore, the defendants 1 to 5 in all utilized the loan facility of Rs. 3,00,000/-.
3. The 1st defendant remained ex parte. The second defendant filed written statement denying certain averments in the plaint and certain averments were admitted by him. Defendants 3 to 5 also filed written statement. They also admitted certain assertions in the plaint and denied some. Defendants 6 and 7 filed their written statements, denied some of the allegations. Following issues were framed by the trial Court:
1. Whether the plaintiff is properly represented and whether the person who signed the pleadings is duly authorized on behalf of the plaintiff?
2. Whether the 1st defendant firm is properly represented?
3. Whether the 1st defendant firm is a registered firm?
4. Whether this suit as framed is maintainable in law?
5. Whether this suit is bad for misjoinder of official receiver?
6. Whether the suit account is true and valid?
7. Whether the alleged equitable mortgage is true and valid?
8. Whether the defendants 3 to 5 are not liable for suit claim?
9. Whether the interest claimed is penal, usurious and exceissive?
10. To what relief?
The learned counsel for the appellant Mr. T. Veerabhadraiah has raised three contentions before this Court and we are confining ourselves to those contentions. The contentions are; (1) that there was no evidence to prove the transaction and the only evidence produced was the statement of Accounts, and according to him, the mere statement of accounts was not conclusive proof for proving the transaction and also proving the net balance, (2) that the mortgage was not found valid as there was no evidence that defendants 2, 6 and 7 had mortgaged the property with the Bank and the mortgage deed had not been produced along with the plaint, and (3) that interest could not have been allowed at 12% and that too when the Court had decreed subsequent interest also which would mean, as a matter of fact, that interest on interest has to be paid.
4. Let us come to the first argument first. The learned counsel for the appellant submits that only 3 witnesses were examined by the plaintiff the first witness is K. Vasantha Rao. The learned counsel submits that this witness had stated that he had worked as Branch Manager in plaintiff Bank during the period from 1988 to 1992. He had filed the suit on behalf of the plaintiff Bank while he was posted at Bhimavaram. He exhibited various documents like pronotes and agreements. He also stated that D2, D6 and D7 deposited three sale deeds under document Nos. 1771, 1772 and 1773, they were exhibited as Ex. A5 to A7. He also exhibited partition deeds which were also marked. Tax receipts with regard to these properties were also filed as Exs. A11 to A16. A17 to A19 are the proceedings of the Land Reforms Tribunals. D2, D6 and D7 executed a memorandum by depositing title deeds under Ex. A20, Ex. A21 is the letter executed by D2 to D5 requesting the Bank for extension of time to discharge the mortgage debt. The learned counsel for the appellant has not challenged all these documents or the evidence. His challenge is only to the extent that the witness had stated; "Ex. A28 is the account copy of the plaintiff bank relating to the transactions with D1 firm". He submits that Ex. A28 does not bear a certificate by the witness therefore the statement of account has not been proved. In cross-examination the witness stated that he was Branch Manager, Bhimavaram from 1-6-88 to 31-5-92. He also stated that he was not present at the time of suit transaction covered under Ex. A1 to A20. He had secured the documents from Bank records before filing the suit. From the cross-examination we have found that no question had been posed on the witness with regard to Ex. A21.
5. The learned counsel for the appellants relies on a judgment of Supreme Court in Chandradhar v. Gauhati Bank, . Before going through the law laaid down by this judgment it will be appropriate to refer to the facts of the case. In this case, the Bank had filed the suit on the ground that moneys were borrowed from the Bank by the defendants in various accounts and on 1st March. 1947 a sum of Rs. 15,956.70 was due to the Bank from the defendant, A mortgage deed had also been executed. Some land, a house, a fixed deposit and three policies were given as security thereunder. The mortgage deed also provided that the Bank would advance money of Rs. 16,000/- to the defendants as and when they required it. The case of the bank was that after the execution of the mortgage deed a further sum of Rs. 10,000/- was borrowed by the defendants on 19th March, 1947. Thereafter two amounts were paid into the bank one on May 14, 1948 and the other on November 24, 1949. Nothing was paid thereafter and eventually a suit was filed for Rs. 40,000/-. The suit was resisted by the appellants on number of defences, one of the defences was that they had not taken any amount as loan from the Bank after March 1, 1947. The Court was primarily considering this defence of the defendants while deciding the suit. The Court had seen that only copy of the statement of accounts maintained by the Bank had been produced as evidence with respect to the Rs. 10,000/-which had been advanced on March 1, 1947 and which was disputed by the defendants. While considering the impact of Section 34 of the evidence Act and also Section 4 of the Bankers' Books Evidence Act of 1891 the Court held (at pp. 1060 and 1061 of AIR) :
"It will be clear that Section 4 gives a special privilege to banks and allows certified copies of their accounts to be produced by them and those certified copies become prima facie evidence of the existence of the original entries in the accounts and are admitted as evidence of matters, transactions and accounts therein, but such admission is only where, and to the same extent as, the original entry itself would be admissible by law and not further or otherwise. Original entries alone under Section 34 of the Evidence Act would not be sufficient to charge any person with liability and as such copies produced under Section 4 of the Bankers' Books Evidence Act obviously cannot charge any person with liability. Therefore, where the entries are not admitted it is the duty of the bank if it relies on such entries to charge any person with liability, to produce evidence in support of the entries to show that the money was advanced as indicated therein and thereafter the entries would be of use as corroborative evidence. But no person can be charged with liability on the basis of mere entries whether the entries produced are the original entries or copies under Section 4 of the Bankers' Books Evidence Act. We cannot agree with the High Court that the mere fact that the appellants did not specifically mention the sum of Rupees 10,000/- as not having been advanced to them in their written statement would make any difference on the facts of the present case. We have already pointed out that the appellants did not admit the correctness of the accounts produced specially after March 1, 1947. We have also pointed out that it was stated on their behalf that nothing was borrowed after March 1, 1947, The main appellant in whose name the account was, appeared as a witness and stated that so far as he remembered he only borrowed Rs. 8,000 from the bank and nothing thereafter. He also stated that he did not remember to have borrowed any sum from the bank after the execution of the mortgage deed. In the face of this pleading of the appellants and the statement of one of them, the bank had to prove that the sum of Rs. 10,000/- was in fact advanced on March 19, 1947 and could not rely on mere entries in the books of account for that purpose. This is clear from the provision in Section 34 of the Evidence Act. No attempt was made on behalf of the bank to prove by any evidence whatsoever that a sum of Rs. 10,000 was advanced on March 19, 1947. The entry in the account books in that connection is to the effect. "To amount paid to Gauhati branch as per D/advice dated 6th March, 1947". If this amount of Rs. 10,000 was paid by the bank on the order of the appellants or any one of them that order should have been produced in support of the entry, and then the entry would have been helpful to the bank as a corroborative piece of evidence. But the bank did nothing of the kind. The only witness produced on behalf of the bank was an officer who had nothing to do with the Tezpur branch where the transactions were entered into. We are, therefore, of opinion that in view of Section 34 of the Evidence Act the appellants cannot be saddled with liability for the sum of Rs. 10,000 said to have been advanced on March 19, 1947 on the basis of a mere entry in the account. Section 34 says that such entry alone shall not be sufficient evidence, and so some independent evidence had to be given by the bank to show that this sum was advanced. What would be the nature of such independent evidence would certainly depend upon the facts of each case, but there can be no doubt that some independent evidence to show that advance had been made has to be given. Further, as in this case the dispute was with respect to one entry of Rs. 10,000, it should not have been difficult for the bank to produce evidence with respect thereto. We cannot, therefore agree with the High Court that the advance of Rs. 10,000 on March 19, 1947 has been proved in this case,"
In view of this judgment the contention of the learned counsel for the appellants is that there is nothing beyond the copy of the statement of accounts on record therefore there could not be any liability of the appellants with respect to alleged transactions. The plea raised by the learned counsel for the appellants would have been accepted but for the written statement of D.W. 2. In para 4 of the written statement the defendant stated; The plaintiff enhanced the loan facility from Rs. 2,50,000/- to Rs. 3,00,000/- to this defendant at his instance and thereupon this defendant executed another pro-note for Rs. 50,000/- for the enhanced loan facility on 30-10-1987 and also executed an agreement dated 30-10-1987 hypothecating the stock in trade and obtained the signatures of defendants 3 to 5 on the said pro-note and the agreement. The allegation that defendants 2, 6 and 7 also consented for the continuation of the equitable mortgage against the B schedule property for the additional loan facility, are all false. This defendant utilized the loan facility of Rs. 3,00,000/-. The contra allegations in para 5 of the plaint are not true." At no point of time the documents and the amount advanced has been disputed by this defendant. After the defendant had admitted his liability he had accepted that the loan of Rs. 3,00,000/- was advanced to him and he had utilized it to the full capacity. Since the original transaction of grant of loan was admitted by the defendant the statement of account becomes relevant and could be relied upon. Even in his written statement D.W. 2 had nowhere stated that the statement of account produced by the plaintiff was false. Even in cross examination to the witnesses of the Bank no such suggestion was made. Since the defendant No. 2 has accepted his liability therefore he cannot derive the benefit from the Judgment of the Supreme Court.
6. The second contention is with respect to the mortgage deed. The learned counsel for the appellants submitted that there was no valid mortgage and in fact no mortgage deed was filed with the plaint. Now, let us examine the evidence which is on record. P.W. 2 stated that he was working as Branch Manager at the plaintiff Bank. He stated that on 20th January, 1986 the 1st defendant firm borrowed an amount pf Rupees 2,50,000/-. This amount had been borrowed by defendants 2 to 5 jointly, They executed demand promissory note Ex. A1. Defendants 2, 6 and 7 mortgaged their landed property to an extent of Ac. 16.00 with the plaintiff Bank. Exs. A5 to A7 are the registered sale deeds relating to the property. Not only the registered sale deeds were deposited but many more documents relating to the land were also deposited. Ex. A6 is the partition deed. Ex. A9 is another sale deed. Ex. A10 is encumbrance certificate on the said property. Ex. A11 to A16 are tax receipts of the above said property, Ex. A17 is the verification form in the Land Reforms case. Ex. A18 and A19 are the proceedings of the Land Reforms Appellate Tribunal. Ex. A20 is memorandum of deposit of title deeds expressing their interest to clear the equitable mortgage. The learned counsel for the appellants has not disputed any document but has only stated that in terms of Order 7, Rule 14 of CPC mortgage deed had to be filed along with the plaint, since it had not been filed it cannot be taken in evidence, and, therefore, the only evidence remains is that the documents relating to the land were deposited, and according to him mere deosit of documents with the Bank would not create a mortgage. In this connection he relies on a judgment in Saradindu v. Amiya Kumar, . But, we have seen that there was no objection taken at any stage to the production of Ex. A20 during the trial or at the time of arguing the matter before the trial Court. Order 7, Rule 14 lays down;
"Order 7, Rule 14 Production of document on which plaintiff sues
14.(1) Where a plaintiff sues upon a document in his possession or power, he shall produce it in Court when the plaint is present, and shall at the same time deliver the document or a copy thereof to be filed with the plaint.
List of other documents --
(2) Where he relies on any other documents (whether in his possession or power or not) as evidence in support of his claim, he shall enter such documents in a list to be added or annexed to the plaint."
But, there is an exception in Rule 18 which lays down; "Order 7, Rule 18 Inadmissibility of document not produced when plaint filed.
18.(1) A document which ought to be produced in Court by the plaintiff when the plaint is presented, or to be entered in the list to be added or annexed to the plaint, and which is not produced or entered accordingly, shall not, without the leave of the Court, be received in evidence on his behalf at the hearing of the suit.
(2) Nothing in this rule applies to documents produced for cross-examination of the defendant's witnesses, or in answer to any case set up by the defendant or handed to a witness merely to refresh his memory."
Since the document was produced by P.W. 2 when his statement was recorded, it was open for the defendants to raise objections. No objections were taken and the document was received in evidence, therefore it has to be presumed that leave had been granted for production of this document under Order 7, Rule 18. Besides the evidence to which a reference has been made, the defendant No. 2 in his written statement stated that the documents were in his possession as defendant No. 7 is his father and 6th defendant is his wife and he had given these documents to the Bank in relation to a prior loan transaction, that loan transaction had never been proved although defendants 6 and 7 in their written statement have stated that they have never executed any equitable mortgage but they accepted that the documents were with defendant No. 2. Therefore, there is overwhelming evidence to show that an equitable mortgage was created.
7. The third argument relates to charge of interest @ 12% per annum from 19-1-89 i.e., the date of suit till the date of realization. The learned counsel submits that, interest has to be paid on interest and it is not reasonable. On the other hand, the learned counsel for the respondents submits that at no point of time during the trial the interest sought by the plaintiff was challenged, but the learned counsel for the appellants has relied on a judgment of Supreme Court in N.M. Veerappa v. Canara Bank, in which the Supreme Court considered the effect of Section 21-A of the Banking Regulation Act vis-a-vis Order 34, Rule 11, of CPC and in almost similar circumstances the Supreme Court allowed 6% interest from the date of the suit till its realization. We accordingly accept this argument and direct that the rate of interest shall be reduced from 12% to 6% per annum with effect from 19-1-89 till the date of realization.
8. With this modification the appeal is allowed to the extent of reduction in the rate of interest. Decree be drawn accordingly.
No order as to costs.