Delhi District Court
Radhe Radhe Fashions Studio Pvt Ltd vs Bank Of India on 6 November, 2025
IN THE COURT OF SH MUKESH KUMAR GUPTA
DISTRICT JUDGE(COMMERCIAL)-07(CENTRAL)
TIS HAZARI COURTS: DELHI
CS (Comm.) No. 554/2018
CNR No. DLCT01-0163882018
(Old Case: 7 years old)
20 oldest cases of Court)
Radhe Radhe Fashions Studio Pvt. Ltd.,
5/36, WEA, Karol Bagh,
New Delhi-110005
......Plaintiff.
Vs
1. Bank of India,
Karol Bagh Branch,
New Delhi-110005,
2. General Manager,
Bank of India, Zonal Office,
New Delhi Zone, Star House,
H-2, Connaught Circus,
Karol Bagh, New Delhi-110001
3. Zonal Manager,
Bank Times New Romanof India, Zonal Office,
New Delhi Zone, Star House, H-2,
Digitally signed Cannaught Circus,
by MUKESH
MUKESH KUMAR
GUPTA
KUMAR Date:
New Delhi-110001
GUPTA 2025.11.06
18:01:04
...... Defendants.
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CS (Comm.) No.554/2018 Radhe Radhe Fashions Studio Vs. Bank of India & Ors. Page no. 1 of 54
SUIT FOR RECOVERY OF RS. 7,32,368/-.
Date of institution of suit : 04.12.2018
First Date before this court : 28.03.2024
Date of hearing of final argument : 31.10.2025
Date of Judgment : 06.11.2025
Appearance(s) : Ms Sonia Sharma, Ld. Counsel for the plaintiff.
Shri Jaspreet Singh, Ld. Counsel for the
defendants.
JUDGMENT
(A) PRELUDE:
1. By way of present judgment, I shall conscientiously adjudicate upon the plaintiff's suit against the defendants for Recovery of Rs.7,32,368/- alongwith interest @ 18% per annum pendentlite and future. The plaintiff has also prayed for costs of the suit.
(B) PLAINTIFF'S CASE
2. Eschewing prolix reference to the pleadings crystallizing the same the plaintiff has averred in the plaint that:-
2.1) The plaintiff is a Private Company registered under the name and style of M/s Radhe Radhe Fashions Studio Pvt. Ltd. and engaged in the business of manufacturing of wearing apparel. The plaintiff company has been one of the reputed customers of the defendant No.1 bank for more than 40 years and has started new retail business in the year 2012.
Digitally The present suit has been instituted through its Authorized Representative signed by MUKESH MUKESH KUMAR KUMAR GUPTA Mr. Parminder Dev Sharma who is duly authorised to file the present GUPTA Date:
2025.11.06 18:01:11 +0530 CS (Comm.) No.554/2018 Radhe Radhe Fashions Studio Vs. Bank of India & Ors. Page no. 2 of 54 suit vide Board Resolution dated 29.11.2018.
2.2) Defendant No.1 is a nationalized bank having its Zonal Offices across the India and abroad whereas the defendants No.2 and 3 are the General Manager and Zonal Manager of the defendant No.1 bank respectively in New Delhi Zone. The defendant No.1 bank provides various banking services including credit facility to its customers.
2.3) In the year 2013, the plaintiff has requested the defendant No.1 bank for credit facilities and the defendants offered the same vide letter dated 22.07.2013 by opening Cash Credit Account no.
600630110000036 on broad terms & conditions. During the Financial Year 2014-15, the working capital limits of the plaintiff was renewed by the defendant No.1 bank vide sanction letter dated 12.11.2014 which were valid till November, 2015. The plaintiff has submitted renewal data/documents to the defendant No.1 bank in November, 2015, however actual renewal had taken place in the month of March, 2016.
2.4) Further, the defendant No.1 bank vide letter dated 24.11.2016, reduced the already existing WCFB of Rs. 5.50 Crores to 4.30 Crores, by Rs.10 lakhs per month w.e.f. July 2016, without informing, and obtaining consent of the plaintiff. The plaintiff remained under an impression that cash credit limits were renewed at existing Digitally signed by terms and conditions and therefore, never compelled the defendant No.1 MUKESH MUKESH bank for providing a short renewal letter.
KUMAR
KUMAR GUPTA
Date:
GUPTA 2025.11.06
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CS (Comm.) No.554/2018 Radhe Radhe Fashions Studio Vs. Bank of India & Ors. Page no. 3 of 54 2.5) It has further been averred that despite charging of the process fee of Rs.1,32,000/- and Rs.1,35,355/- on 25.07.2015 and 25.07.2016 respectively, the defendant No.1 bank has renewed the cash credit account in March, 2016 as stated in forgoing paragraphs and charged excess interest on the same.
2.6) The plaintiff vide various letters, including the letters dated 21.06.2016 and 14.06.2016 and other mode of correspondences, and even through its representative informed the defendant No.1 bank about the same and requested to refund the excess interest of Rs.12,75,708/- as charged by the defendant No.1 bank. Consequently, after due approval by the branch as well as zonal office of the defendant No.1 bank, the plaintiff company was refunded an interest component of Rs.9,01,372/- only as against the total claim of Rs.12,75,708/- on 29.06.2017 and the remaining amount of reduced interest of Rs.3,74,336/- was withheld illegally and without any justification by the defendant No.1 bank for which the plaintiff wrote a letter dated 22.09.2017 requesting the defendant No.1 bank to provide a valid reason for not refunding the remaining amount of Rs.3,74,336/- alongwith the complete copy of the correspondences made by the Karol Bagh Branch with the Zonal office of the defendant No.1 bank. The plaintiff also requested to refund interest of Rs.3,58,032/- being interest on penal interest excess charged by the defendant No.1 bank.
Digitally signedMUKESH by MUKESH KUMAR GUPTA KUMAR Date:
GUPTA 2025.11.06 2.7) It is further averred that the total refund claimed by the 18:01:24 +0530 CS (Comm.) No.554/2018 Radhe Radhe Fashions Studio Vs. Bank of India & Ors. Page no. 4 of 54 plaintiff bank vide letter dated 22.09.2017 amounted to Rs.12,75,708/-
and the amount of interest on penal interest was amounting to Rs.3,58,032/-, therefore, the total outstanding amount come out to be Rs. 16,33,740/- out of which the defendant bank refunded an amount of Rs.9,01, 372/- to the plaintiff leaving a balance of Rs.7,32,368/- which is still due as shown in tabular form as under:
Financial Penal Interest on Total Interest Net Refund Year Interest Penal Interest Refund Charged Interest 2013-14 1,85,870 5,435 1,91,305 2014-15 4,29,321 63,121 4,92,442 2015-16 3,77,159 97,785 4,74,944 2016-17 2,83,358 1,91,691 4,75,049 9,01,372 Total 12,75,708 3,58,032 16,33,740 9,01,372 7,32,368 Further, the defendant No.1 bank in its reply dated 17.10.2017 to the aforesaid letter of the plaintiff has absurdly stated that the plaintiff has failed to submit the stock statements, renewal data and information in time resulting into delayed review of the account of the plaintiff and charging of overdue and penal interest.
2.8) It has further been averred that the defendant No.1 bank has even ignored various guidelines issued by Reserve bank of India from time to time which clearly provides that if credit limits are not renewed within 90 days of due date of renewal, the borrowers account automatically becomes NPA in records of the bank. Further, as per the procedure of the banks, the accounts books are to be regularly audited by Digitally signed by MUKESH MUKESH KUMAR the concurrent auditor and since the same has not been done, the GUPTA KUMAR Date:
GUPTA 2025.11.06 18:01:31 +0530 CS (Comm.) No.554/2018 Radhe Radhe Fashions Studio Vs. Bank of India & Ors. Page no. 5 of 54 defendant No.1 bank has neither reported any irregularity nor informed the plaintiff about any irregularity or defect with respect to its cash credit account. Therefore, the defendant bank is liable to refund the excess charged amount. Upon failure of the defendant to refund the excess charged amount, the plaintiff has issued a legal notice dated 20.04.2018 to the General Manager as well as the Zonal Manager at Zonal Office, New Delhi of the defendant No.1 bank through its counsel, however, the defendants have neither replied to the said legal notice nor refunded the claimed amount of Rs.7,32,368/-.
2.9) The plaintiff has thus claimed accrual of cause of action in November, 2014 i.e. the date when defendants charged the penal interest first time without any fault on the part of the plaintiff and further on 29.06.2017, when the defendant No.1 bank reversed the amount of R.9,01,372/- out of total charged penal interest after several requests and reminders of the plaintiff and finally on 20.04.2018, when the plaintiff got issued the legal notice to the defendant. Hence, the present suit for recovery of Rs.7, 32,378/- with interest and costs.
(C) DEFENDANT'S CASE:-
3. On receipt of summons for settlement of issues, the defendant contested the suit by filing a detailed Written Statement thereby taking preliminary objections :-
3.1) the suit is not maintainable as the suit of the plaintiff is hopelessly time barred as well as the suit is bad for mis-joinder and non-
Digitally signed by MUKESH joinder (of necessary parties). Further, the suit is not maintainable as the MUKESH KUMAR KUMAR GUPTA GUPTA Date:
2025.11.06 18:01:37 CS (Comm.) No.554/2018 Radhe Radhe Fashions Studio Vs. Bank of India & Ors. Page no. 6 of 54 +0530 plaintiff has not approached the court with clean hands and concealed material facts of the case.
3.2) The defendants have contended that in the year 2013, the plaintiff requested for credit facility from the defendants and vide letter dated 22.07.2013, the defendant No.1 offered the credit facility to the plaintiff on terms & conditions specified therein by opening a Cash Credit Account no. 600630110000036. Since, the plaintiff has been irregular in submission of stock statements/MSOD/QIS etc, penal interest has been charged on the account of the plaintiff in terms of agreed terms and conditions. It has further been contended that the detailed amount of review overdue and penal interest for untimely submission of stock statements/MSOD/QIS etc has also been duly informed to the representative of the plaintiff, who was visiting the branch of the defendants from time to time. The defendants have further contended that it has been charging the agreed floating rate of interest which varies from time to time as per RBI Rules regulations and guidelines, and the plaintiff is in the habit of always raising the pleas of charging of exorbitant rate of interest from time to time by defendants without itself adhering to the terms and conditions of the sanction of credit facilities and therefore, the allegations made by the plaintiff are totally false, fabricated and baseless.
3.3) It has also been contended that delay in renewal of the Cash Credit Account was due to late submission of stock Digitally signed by MUKESH statements/MSOD/QIS etc which was required to be submitted by the MUKESH KUMAR GUPTA KUMAR Date:
GUPTA 2025.11.06 18:01:44 +0530 CS (Comm.) No.554/2018 Radhe Radhe Fashions Studio Vs. Bank of India & Ors. Page no. 7 of 54 plaintiff prior to the due date of renewal i.e. November, 2015. It has further been contended that though the books of the banks are audited by the concurrent auditors, however, charging of interest in the Accounts is not verified.
3.4) It has further been contended that the plaintiff was duly advised by the sanction letter issued by the defendants about reduction of WCFL from July, 2016 by Rs.10,00,000/- per month after renewal of limits. Further, since the renewal charges are levied annually therefore, the charges levied on 25.07.2015 and 25.07.2016 on cash credit account of the plaintiff are according to the RBI Guidelines.
3.5) It has further been contended that vide its letter dated 17.10.2017, the defendants have advised the plaintiff that an amount of Rs.9,01,372/- is refundable instead of Rs.16,33,740/- and the defendants have already been refunded the aforesaid amount of Rs.9,01,372/- on 29.06.2017 which includes not only the penal interest charged for delayed submission of stock statements/MSOD/QIS etc, but also the interest on penal interest. This refunded amount was duly verified by the representative of the plaintiff Shri Deepak Kumar.
3.6) It has further been finally averred that there is no liability of the defendants to pay claimed amount of Rs.7,32,368/- or any interest thereupon as no amount is due against the defendants and prayed that Digitally signed by MUKESH the suit be dismissed with costs.
MUKESH KUMAR KUMAR GUPTA GUPTA Date:
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4. A detailed replication to the Written Statement was also preferred by the plaintiff reiterating the contents of the plaint and vehemently denying the contents of the Written Statement. The plaintiff reiterated that the stock statements/MSOD/QIS etc. had been submitted to the defendant No.1 bank from time to time and the defendants had never informed the plaintiff about the change in rate of interest as per the RBI guidelines. The plaintiff has finally reiterated its prayer.
(D) CRYSTALISING THE DISPUTE :-
5. On the pleadings of the parties and documents placed on record the affidavit of admission and denial of the parties and after hearing Ld. Counsels for the parties, the following issues were framed for adjudication vide order dated 12.12.2019.
ISSUES.
1. Whether the suit is barred by Law of Limitation ? OPD
2. Whether the plaintiff is entitled to the amount as claimed for ?OPP
3. Whether the plaintiff is entitled to the interest, if so, at what rate and for which period ?OPP
4. Relief.
(E) EVIDENCE OF PLAINTIFF.
6. Plaintiff, in support of her case, got examined only one witness as PW1, Shri Tarsem Lal Batra S/o Shri Bansi Lal Batra, though it has also filed the affidavits of Parminder Dev Sharma and Deepak Sharma, Digitally signed MUKESH by MUKESH KUMAR GUPTA however Ld. Counsel for plaintiff closed the evidence only on KUMAR Date:
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completion of examination of PW1 on 16.07.2022.
7. PW1 Mr. Tarsem Lal Batra has reiterated the contents of the plaint on oath in his affidavit Ex.PW1/A. He got exhibited the following documents during his deposition :
Sr. Particulars Exhibits
No.
1. Memorandum of Article of Ex.PW1/1 (colly)
Association of the plaintiff
of the company
2. Board Resolution dated Ex.PW1/2
29.11.2018 and (colly)
Authorization Letter
3. Sanction Letter dated Ex.PW1/3
22.07.2013 (colly)
4. Sanction Letters dated Ex.PW1/4
12.11.2014 (colly)
5. Sanction Letter Ex.PW1/5
(colly)
6. Renewal Letter dated Ex.PW1/6
24.11.2016
7. Detailed Interest Report for Ex.PW1/7
Accounts dated 25.07.2013 (colly) and
to 10.06.2016 and detailed Ex.PW1/8 (colly)
interest report for accounts
w.e.f. 25.07.2013 to
30.06.2017
8. Refund of Excess Interest Ex.PW1/9 (colly)
Charged in Cash Credit
Account dated 21.06.2016
9. Refund Claim letter Ex.PW1/10 (colly)
10. Renewal of Credit Ex.PW1/11
Digitally signed
by MUKESH
Facilities letter (colly)
MUKESH KUMAR
GUPTA
KUMAR Date: 11. Refund of Excess Interest Ex.PW1/12
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12. Account Interest Details Ex.PW1/13
Inquiry
13. Statement of Account dated Ex.PW1/14
29.06.2017 (colly)
14. Summary of Interest Ex.PW1/15
charged F.Y. 2013-14 (colly)
15. Excess charging of interest Ex.PW1/16
letter dated 22.09.2017 (colly)
16. Letter dated 17.10.2017 Ex.PW1/17
(colly)
17. Excess charging of interest Ex.PW1/18 (colly)
letter dated 24.09.2017
18. Letter dated 01.02.2018 Ex.PW1/19
19. Legal Notice dated Ex.PW1/20
20.04.2018 (colly)
20. Ledger Account w.e.f. Ex.PW1/21
01.04.2014 to 31.03.2017 (colly)
21. Certificate for geniuses of Ex.PW1/22
the Ledger
analysis/account statement
as per Section 65-B of
I.E.A.
22. Notice under Order XII Ex.PW1/23
Rule 8 of CPC dated (colly)
22.02.2020
He has finally deposed that the defendant has no right to withhold/deny the refund of Rs.7,32,368/- of the plaintiff without any cause which is a wrongful loss to the plaintiff and wrongful gain to the defendant for which defendant bank is liable to pay to the plaintiff.
8. During cross-examination, Ld. Counsel for defendants has tried to puncture the testimony of PW1 on the aspect of acceptance of terms and conditions of the sanction letters, the knowledge regarding the Digitally signed by MUKESH MUKESH KUMAR KUMAR GUPTA Date:
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irregularity of the plaintiff in submission of stock statements, personal dispute with any of the officials of the defendant No.1 bank and the point of liability of defendants. PW1 has admitted that he has collected copy of the letter dated 24.11.2016 Ex.PW1/6 from the branch office of the defendant No.1 bank in the last months of year 2016 or starting months of the year 2017 but has failed to state specifically that he had made any representation to the defendants against this letter. He has then added that their meetings were regularly held with the officials of the bank to solve the issue. He has deposed that he has been regular in submitting stock statement to the defendant since 2013 till 2017 and has deposed that he has knowledge of the fact that the delayed submission of the stock statement would attract penalty on company. He has further deposed that he has opened the account after entering into the agreement with the defendant No.1 bank. He has specifically admitted that the bank officials has informed him about irregularity in submitting the stock statement. He has further deposed that he had made a claim of Rs.16,33,740/- against the defendant No.1 bank and the defendants had refunded Rs.9,01,372/-
to him. He has denied the suggestion that his accountant, Shri Deepak, had given any letter dated 17.10.2017 to the defendant No.1 bank as to the correctness of the defendants. Finally, he has denied the suggestion that the defendant No.1 bank has charged everything in the account according to the agreement and as per the guidelines of the RBI. While referring to the fact that grievance started in the year 2015, two years after opening of the credit facility, he has admitted that plaintiff has no Digitally signed personal dispute with any of the bank officials. MUKESH by MUKESH KUMAR GUPTA KUMAR Date:
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9. Ld. Counsel for the plaintiff closes her evidence by giving statement on 16.07.2022.
(F) DEFENDANT'S EVIDENCE :-
10. The defendants in their defence have examined only one witness their Chief Manager Ms. Nikki Tyagi, as DW1 who in her evidence by way of affidavit Ex.DW1/A, reiterated the contents of the Written Statement on oath. She got exhibited the Authority Letter dated 02.03.2023 in her favour as Ex.DW1/1. She has reiterated in her deposition that since the plaintiff has been irregular in submission of stock statements/MSOD/QIS etc., penal interest has been charged into their account. Further, deposing that the details/amount of review overdue & penal interest or untimely submission of stock statements/MSOD/QIS etc. was duly informed to the plaintiff & their representatives visiting the branch of the defendants. She has further deposed that the defendant No.1 bank has been charging the agreed floating rate of interest which varies from time to time as RBI guidelines and as per agreed terms and conditions of the sanction letter, the plaintiff was required to submit the documents for the renewal of the credit facility in advance i.e. November, 2015 but the plaintiff has submitted the papers with delay and the plaintiff was advised vide letter dated 24.11.2016 about reduction of WCFL since July 2016 by Rs.10 lakhs per month on renewal of limits. She has further deposed that the renewal of limit of the cash credit account of the plaintiff was processed by the zonal office with reduction of limit thereon being processed based on actual Digitally signed KUMAR GUPTA estimates of the plaintiff.
MUKESH by She has further deposed that the defendant MUKESH KUMAR Date:
2025.11.06 GUPTA 18:02:29 +0530 CS (Comm.) No.554/2018 Radhe Radhe Fashions Studio Vs. Bank of India & Ors. Page no. 13 of 54 No.1 bank vide its letter dated 17.10.2017 has replied to letter dated
22.09.2017 of the plaintiff and the details of refunds of Rs.9,01,372/- against claim of Rs.16,33,740/- was advised to the plaintiff and as such, there is no default on the part of the defendant No.1 bank and the letter contained the details of refunds as well as interest charged, the amount of which was also duly verified by representative of plaintiff Shri Deepak Kumar. She has further deposed that books of the banks are audited by concurrent auditors but charging of interest in the Accounts is not verified and the defendants have verified the records and refunded Rs.9,01,372/-
11. The witness DW1 was subjected to cross-examination at length by Ld. Counsel for the plaintiff. During cross-examination, DW1 has admitted that she has not filed any guidelines of RBI and its clauses pertaining to dispute in question. She has also admitted that all the bank records and accounts are being assessed and audited by the Auditor specially appointed for the purpose of the bank account. He has also deposed that the Auditor reviews all the files but again deposed that due to paucity of time, he does not review all the files and as per guidelines of RBI now only 50% of the files have to be reviewed by the Auditor instead of 75% files which were to be reviewed as per earlier guidelines. She has also deposed that generally bank issues the notice to its customers with respect to levying/charging of interest, penal interest and any other interest, whatsoever by the bank. She has denied the Digitally suggestion that the plaintiff has been submitted stocks statements signed by MUKESH regularly. She has further deposed that she cannot say whether MUKESH KUMAR KUMAR GUPTA GUPTA Date:
2025.11.06 18:02:36 +0530 CS (Comm.) No.554/2018 Radhe Radhe Fashions Studio Vs. Bank of India & Ors. Page no. 14 of 54 defendant No.1 bank has given any interest on wrongly charged penal interest without checking the records. She has denied the suggestion that bank is liable to pay the suit amount to the plaintiff.
12. No other witness was examined by the defendants and the evidence of the defendants was closed vide statement dated 18.04.2023.
(G) ARGUMENTS ADDRESSED:-
ARGUMENTS OF PLAINTIFF.
13. Ld. Counsel for the plaintiff Ms. Sonia Sharma who has vehemently argued the matter for quite sometime states that the plaintiff has proved its case in all aspects. It has been argued that in the year 2013, the plaintiff has been granted Cash Credit Facilities by the defendant No.1 bank vide letter dated 22.07.2013 on certain terms and conditions by opening cash credit account No.600630110000036. Ld. Counsel has further argued that the plaintiff was regular in submitting the stock statement/MSOD/QIS etc. and without that the defendants would not have renewed the credit facilities. While referring to para No.48 of the sanction letter dated 12.11.2014 which provides that the bank shall be entitled to notify the plaintiff about charging of interest/commissions/charges, she has argued that the same has not been complied with by the defendant No.1 bank, therefore, the plea of the defendants that the plaintiff has been irregular in submitting the stock statement/MSOD/QIS etc. bears no weight. Moreover, it was the Digitally signed by defendant No.1 bank which delayed the process of renewal of the cash MUKESH MUKESH credit account of the plaintiff and renewed the same in March, 2016 KUMAR KUMAR GUPTA Date:
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despite submission of the aforesaid document in November, 2015.
14. Ld. Counsel has further argued that the defendant No.1 bank has also contradicted Clause 34 wherein it is mentioned that the Receivable Audit will be done at annual intervals by stock auditors appointed by the bank at the cost of the firm, however the defendant No.1 bank has failed to do so and as such, the defendants failed to prove that they have ever appointed any auditor for the aforesaid purpose. Ld. Counsel has further argued that the defendants have admitted the bank statements Ex.PW1/7 (colly) and even Ex.PW1/8(colly) which shows column of rate of interest highlighting that interest of 1% and 2% have been charged as penal interest on the account of the plaintiff. Further, the defendants have also admitted the letter dated 21.06.2016 Ex.PW1/9(colly) wherein the plaintiff has mentioned year-wise details of the refunded amount from FY 2013 -14 to 2016-17 and as such a total amount of Rs.10,31,169/- was due as on 21.06.2016 for which the plaintiff has further requested to return the aforesaid amount by its letters dated 02.08.2016 and 04.06.2017. Furthermore, vide letter dated 21.06.2017, the plaintiff has provided the calculation for charging of penal interest and further interest charged thereon for the FY 2013 to 2017 amounting to Rs. 12,75,708/- and requested for the return thereof.
15. It has further been argued that letter of Bank Statements dated 29.06.2017, Ex.PW1/14(colly) shows reversal of Rs.9,01,372/- leaving Digitally signed by the balance of Rs.3,74,336/- still required to be returned by the MUKESH MUKESH KUMAR KUMAR GUPTA GUPTA Date: defendants. The defendants, on one hand, have admitted the table 2025.11.06 18:02:50 +0530 CS (Comm.) No.554/2018 Radhe Radhe Fashions Studio Vs. Bank of India & Ors. Page no. 16 of 54 annexed alongwith Ex.PW1/14 (colly), submitted by the plaintiff while on the other hand, they have denied summary of interest provided in Ex.PW1/15(colly). Furthermore, the plaintiff while letter dated 22.09.2017, Ex.PW1/16 (colly) has again pressed for the refund of the amount Rs.7,32,368/- charged as penal interest including Rs.3,58,032/- charged as an interest on penal interest. It has been further argued that the defendant bank has failed to show on record that the terms and conditions of the sanction letters are in consonance of RBI Guidelines or the self created terms and conditions of defendants as the clauses mentioned in all the three credit facilities letters are not similar. Ld. Counsel has further argued that plaintiff has sent legal notice dated 20.04.2018 explaining in detail and demanding the amount of Rs.7,32,368/- but to no avail. Further, the defendants have not even replied to the notice u/O XII rule 6 CPC Ex. PW1/23 (colly) asking for placing on record the documents mentioned therein to be produced before the court. Ld. Counsel has finally prayed for decreeing the suit with interest and costs and the suit .
ARGUMENTS OF DEFENDANT:
16. Ld. Counsel for the defendants Shri Jaspreet Singh on the other hand, has vehemently argued that Civil Court lacks jurisdiction to adjudicate upon the suit of the plaintiff being barred by Section 21A of the Banking Regulation Act, 1949, which provides that a transaction between a Banking Company and its debtor shall not be reopened by the Court on the ground that the rate of interest charged by the Banking Digitally signed by MUKESH Company in respect of such transaction is excessive. It has been argued MUKESH KUMAR GUPTA KUMAR Date:
GUPTA 2025.11.06 18:02:57 +0530 CS (Comm.) No.554/2018 Radhe Radhe Fashions Studio Vs. Bank of India & Ors. Page no. 17 of 54 that even charging excess interest, if the same does not exceed the rates of interest as determined by the RBI guidelines, cannot be challenged in the court of law. He has vehemently relied upon the pronouncement of law laid down in Corporation Bank Vs. D.S. Gowda and Ors. MANU/SC/0788/1994) to argue that since the account statement filed on record clearly shows that no penal interest of 1% or 2% has been charged in the financial year 2016-17 i.e. 01.04.2016 to June, 2017, the whole claim of the plaintiff is based on charging of excess interest by the defendants and as such, the bank is not liable to return any amount to the plaintiff.
17. Ld. Counsel has further argued that the plaintiff has failed to comply with section 12A of the Commercial Courts Act, 2015 by not adopting PIMS and the same goes to the root of the matter due to which the present suit is not maintainable in the eyes of law. Ld. Counsel has further argued that Cash Credit Facilities have been granted to the plaintiff on floating rate of interest as per the Base Lending Rate of the RBI which changes as per RBI guidelines only and the plaintiff has agreed to the same by accepting, signing and stamping the sanction letters dated 22.07.2013 and 12.11.2014 and now cannot question their contents. While relying upon Rajesh Monga Vs. HDFC Limited and Ors. (2024) 3 CLJ 306 SC, Ld. Counsel has argued that since the plaintiff has duly agreed the terms and conditions and interests have been charged by the bank strictly as per the RBI guidelines and the terms and conditions of sanction letters, the plaintiff cannot subsequently raise the Digitally MUKESH signed by MUKESH KUMAR plea of charging excess or penal interest and maintain their unnecessary KUMAR GUPTA GUPTA Date:
2025.11.06 18:03:03 +0530 CS (Comm.) No.554/2018 Radhe Radhe Fashions Studio Vs. Bank of India & Ors. Page no. 18 of 54 frivolous litigation. It has been argued that the representative of the plaintiff namely Shri Deepak Sharma used to look after the account of the plaintiff on day to day basis and he had never raised any objections about the charging of interest by the defendant No.1 bank in accordance with the sanctioned limits and terms & conditions agreed upon. Ld. Counsel has further argued that the revised sanction letter can be issued by the defendant No.1 bank only after receiving of the requisite documents for renewal. It has been argued that the plaintiff has cleverly not mentioned the fact that the plaintiff has failed to submit the requisite documents for renewal. It has further been argued that the plaintiff has to submit the said documents in March, 2015, however, the same has been submitted in November, 2015 and as such, the default is on the part of the plaintiff itself and the defendant No.1 bank is well within its rights to charge penal interest as per agreed terms and conditions.
18. Ld. Counsel has further argued that since the plaintiff has failed to bring any document on record to show compliance of conditions mentioned Sanction letter dated 22.07.2013 more particularly Clause 10, it is liable to pay penal interest to the defendant bank strictly as per agreed terms and conditions. It has been further argued that in letters dated 21.06.2016, the plaintiff has also failed to provide the details as to how the amount stated therein has actually been arrived at. Further, even the letter has not been proved on record by summoning the witness which has signed it. The plaintiff has also failed to provide any basis, reason or Digitally signed by justification for refund of the excess interest from 09.02.2013 to MUKESH MUKESH KUMAR KUMAR GUPTA GUPTA Date:
10.06.2016 and as per Certificate u/s 65-B, Shri Deepak Sharma who has 2025.11.06 18:03:09 +0530 CS (Comm.) No.554/2018 Radhe Radhe Fashions Studio Vs. Bank of India & Ors. Page no. 19 of 54 made the said calculation, has not been examined by the plaintiff despite being made a witness in the list. Ld. Counsel has further argued that the defendant No.1 bank, for maintaining good relations with the plaintiff, has already returned a sum of Rs.9,01,372/- on 29.06.2017 after due verification and as such, the defendants are now not liable to pay anything to the plaintiff. It has been further argued that the plaintiff has failed to file complete documents in its possession as required under Order XI of the Commercial Courts Act, 2015 which is evident from the fact that had the plaintiff has claimed to have submitted all the documents or calculation sheet as annexed with its various relied upon letters to the defendant No.1 bank, the same should have been placed on judicial record. Ld. counsel has further argued that the ledger account Ex.PW1/21 is not proved in accordance with law as same is not supported by the affidavit u/O XI Rule 1 (vi) CPC or Certificate u/s 65-B of the Indian Evidence Act, 1872. Further the certificate u/s 65-B of the Indian Evidence Act cannot be read or considered in evidence as the signatory thereto, Mr. Deepak Sharma, has not been examined by the plaintiff. He has relied upon the pronouncement of law laid down in Samsung India Electronics Private Limited Vs. MGR Enterprises and Ors.
MANU/DE/1979/2019. He has finally argued that the suit being an unnecessary, frivolous and 'take a chance' litigation is liable to be dismissed with exemplary costs.
(H) ANALYSIS & DETERMINATION:-
19. I have heard the arguments addressed by the Ld. Counsels for the parties, perused the entire record and have duly considered the same. My issues-wise determination are as under:-
Digitally signed by MUKESH MUKESH KUMAR KUMAR GUPTA Date:
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CS (Comm.) No.554/2018 Radhe Radhe Fashions Studio Vs. Bank of India & Ors. Page no. 20 of 54 ISSUE No.1: "Whether the suit is barred by Law of Limitation ? OPD
20. The onus of proving this issue was held upon the defendants who have taken a preliminary objection in the Written Statement that the suit is hopelessly barred by law of limitation. However, no specific evidence on this issue has been led by either of the parties. Since the issue of limitation is a mixed question of law and facts, the court is required to determine the same for the purpose of deciding the entitlement of plaintiff to the relief claimed otherwise also. As per Section 3 of the Limitation Act, 1963, (hereinafter referred to as the Act), any suit, application or appeal has to be filed within the period of limitation as prescribed under the schedule annexed to the Act and subject to provisions contained in Section 4 to 24 of the Act, irrespective of the fact whether limitation has been set up as a defence or not. It is a settled proposition of law that law of limitation is a law of repose, peace and justice which bars the remedy after the lapse of particular period by way of public policy and expediency. Further, it is obligatory on the part of the court to dismiss a suit or appeal if the same is made after the prescribed period, even though limitation is not set up as a defence or there is no plea regarding issue of limitation. Reliance placed on (2011) 3 SCC 436 State of Orissa Vs. Mamta Mohanty.
21. It may be seen that the present suit is for recovery of penal interest charged on Cash Credit Account facility by the defendants. The instant suit being not covered in any of the Articles specified in the schedule Digitally signed by annexed to the Act, the same is required to be covered under the MUKESH MUKESH KUMAR KUMAR GUPTA GUPTA Date:
2025.11.06 Residuary article 113 of the Schedule annexed to the Act, according to 18:03:21 +0530 CS (Comm.) No.554/2018 Radhe Radhe Fashions Studio Vs. Bank of India & Ors. Page no. 21 of 54 which the period of limitation to institute any suit for which no period of limitation is provided elsewhere in the Schedule is 3 years from the date when the right to sue accrues. The Hon'ble Supreme Court in State of Punjab and Ors. Vs. Gurdev Singh (1991) 4 SCC 1: AIR 1991 SC 2219 has succinctly held that according to the third column in Article 113, time period commences to run when the right to sue accrues. Now the expression "right to sue" ordinarily means the right to seek relief by means of legal proceedings for enforcement of a legal right. This right to sue accrues only when the cause of action arises i.e. the right to initiate legal proceedings to obtain relief against any encroachment of right.
22. According to Blackwell's dictionary, cause of action means a set of facts that creates a valid legal claim that can be grounds for a law suit. The Hon'ble Supreme Court of India has described the cause of action as:.
"The cause of action means a bundle of material facts which it is necessary for the plaintiff to prove in order to get relief in the suit. [2024] 5 S.C.R. 404: 2024 INSC 333 Arcadia Shipping Ltd. V. Tata Steel Limited and Others."
23. In the instant case, the plaintiff has availed Cash Credit Facility from defendant No.1 bank and the defendant bank has allegedly charged penal interests of 1% and 2% thereupon in contravention of the terms and conditions of the sanctioned rate of interest. The plaintiff has written various letters/representations Ex.PW1/9 (colly), Ex.PW1/16 (colly) and Ex.PW1/18 (colly) Digitally signed MUKESH by MUKESH KUMAR GUPTA against the same to the defendants and upon verifying the amount of KUMAR Date:
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the penal interest so charged, the defendant No.1 bank has reversed an interest of Rs.9,01,372/- on 29.06.2017. The defendants vide the letter dated 17.10.2017, Ex.PW1/17 (colly) have informed the plaintiff that due to irregularities in submission of stock statements/MSOD/QIS etc. the penal interest has been charged on the account and has denied the claimed interest of Rs.7,32,368/- as claimed by the plaintiff vide its letter dated 22.09.2017 [Ex.PW1/16 (colly)].
24. In a recent pronouncement R.K. Goel Abhey Kumar Jain Vs. Municipal Corporation of Delhi, RFA (COMM) 424/2024 (D.O.D: 14.07.2025), our own Hon'ble High Court while dealing with Article 113 of the Act, has held that:-
"37. Under Article 113 of the Limitation Act, time commences to run when the right to sue accrues. The expression "when the right to sue accrues"in Article 113 of the Limitation Act, the same need not always mean "when the right to sue first accrues". For the right to sue to accrue, the right sought to be vindicated in the suit should have already come into existence and there should be an infringement of it or at least a serious threat to infringe the same. Thus, the right to sue under Article 113 of the Limitation Act accrues when there is an accrual of rights asserted in the suit and an unequivocal threat by the defendant to infringe the right asserted by the plaintiff in the Digitally suit. Thus, "right to sue"means the right to seek relief by means signed by MUKESH MUKESH KUMAR KUMAR GUPTA of legal procedure when the person suing has a substantive and GUPTA Date:
2025.11.06 18:03:34 +0530 exclusive right to the claim asserted by him and there is an CS (Comm.) No.554/2018 Radhe Radhe Fashions Studio Vs. Bank of India & Ors. Page no. 23 of 54 invasion of it or a threat of invasion. The use of the phrase "right to sue"is synonymous with the phrase "cause of action"and would be in consonance when one uses the word "arises"or "accrues" with it." (emphasis supplied)
25. The Hon'ble Supreme Court in M/s Shakti Bhog Food Industries Ltd. Vs. The Central Bank of India (supra) has also observed that :-
9. The expression used in Article 113 of the 1963 Act is "when the right to sue accrues", which is markedly distinct from the expression used in other Articles in First Division of the Schedule dealing with suits, which unambiguously refer to the happening of a specified event. Whereas, Article 113 being a residuary clause and which has been invoked by all the three Courts in this case, does not specify happening of particular event as such, but merely refers to the accrual of cause of action on the basis of which the right to sue would accrue.
10. Concededly, the expression used in Article 113 is distinct from the expressions used in other Articles in the First Division dealing with suits such as Article 58 (when the right to sue "first" accrues), Article 59 (when the facts entitling the plaintiff to have the instrument or decree cancelled or set aside or the contract rescinded "first" become known to him) and Article 104 (when the plaintiff is "first" refused the enjoyment of the right). The view taken by the trial Court, which commended to the first appellate Court and the High Court in second appeal, would inevitably entail in reading the Digitally signed expression in Article 113 as - when the right to sue (first) by MUKESH MUKESH accrues. This would be rewriting of that provision and doing KUMAR GUPTA KUMAR Date:
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violence to the legislative intent. We must assume that the Parliament was conscious of the distinction between the provisions referred to above and had advisedly used generic expression "when the right to sue accrues" in Article 113 of the 1963 Act. Inasmuch as, it would also cover cases falling under Section 22 of the 1963 Act, to wit, continuing breaches and torts.
(emphasis supplied)
26. The Hon'ble Court has referred the dictum of a three Judge Bench in Union of India & Ors. Vs. West Coast Paper Mills Ltd. & Anr. (2004) 2 SCC 747, which has had an occasion to examine the expression used in Article 58 in contradistinction to Article 113 of the 1963 Act. We may advert to paragraphs 19 to 21 of the said decision, which read thus:
"19. Articles 58 and 113 of the Limitation Act read thus:
Articl Description of suit Period Time from which e No. of period begins to limitation run 58 To obtain any Three When the right to other declaration. years sue first accrues.
*** *** *** ***
113 Any suit for which Three When the right to
no period of years sue accrues.
limitation is
provided elsewher
MUKESH Digitally
by MUKESH
signed
KUMAR Date: 2025.11.06
KUMAR GUPTA e in this Schedule.
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20. XXX
21. A distinction furthermore, which is required to be noticed is that whereas in terms of Article 58 the period of three years is to be counted from the date when "the right to sue first accrues", in terms of Article 113 thereof, the period of limitation would be counted from the date "when the right to sue accrues". The distinction between Article 58 and Article 113 is, thus, apparent inasmuch as the right to sue may accrue to a suitor in a given case at different points of time and, thus, whereas in terms of Article 58 the period of limitation would be reckoned from the date on which the cause of action arose first, in the latter the period of limitation would be differently computed depending upon the last day when the cause of action therefor arose."
(emphasis supplied)
27. The Hon'ble Apex Court in that case has finally held that the right to sue accrued to the appellant on receiving letter from the Senior Manager, dated 08.05.2002, and in particular letter dated 19.09.2002, and again on firm refusal by the respondents vide Advocate's letter dated 23.12.2003 in response to the legal notice sent by the appellant on 28.11.2003; and once again on the follow up legal notice on 07.01.2005, the plaint filed in February, 2005 would be well within limitation. Considering the former events of firm response by the respondents on 8.5.2002 and in particular, Digitally MUKESH signed by MUKESH KUMAR 19.09.2002, the correspondence ensued thereafter including the two KUMAR GUPTA Date:
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legal notices sent by the appellant, even if disregarded, the plaint/suit filed on 23.2.2005 would be within limitation in terms of Article 113.
28. The crux of the aforesaid settled law laid down by the Hon'ble superior courts is laying down the clear distinction between a fixed cause of action and a continuing one and covering the cases where the accrual of right to sue for the first time does not necessarily ignites the commencement of limitation. The accrual of the right to sue, for the purpose of determining the period of limitation under Article 113 of the Act, in contradistinction to the first division of the schedule of the Act, does not necessarily arise when the right to sue first accrues and rather it arises where there is a clear and unequivocal threat of infringement of a legal right of the plaintiff. Therefore, in the present case though the recovery of money may pertain to a period 2013 to 2017 but it was the first response/letter from the defendant No.1 bank which is dated 17.10.2017 [Ex.PW1/17 (colly)], firmly rejecting the interest claimed by the plaintiff and giving rise to a valid cause of action and a right to sue to the plaintiff. Furthermore, the plaintiff has also served a legal notice dated 20.04.2018 Ex.PW1/20 upon the defendants claiming the said interests which has not been duly replied by the defendants. Thus, if 17.10.2017 is considered for reckoning of the period of limitation under Article 113 of the Act, the instant suit being filed on 04.12.2018 is well within the period Digitally signed MUKESH by MUKESH KUMAR GUPTA of limitation.
KUMAR Date:
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29. This issue is accordingly decided against the defendants and in favour of the plaintiff.
ISSUE No.2: "Whether the plaintiff is entitled to the amount as claimed for ?OPP
30. The onus of proving this issue was held upon the plaintiff and since this issue pertains to the entitlement of the plaintiff to the recovery of amount claimed, the same is pivotal to the instant case. The plaintiff has claimed the suit amount on the basis of charging of excess interest and penal interest by the defendant No.1 bank, as per pleadings, though by the end of trial, Ld. Counsel for plaintiff Ms. Sharma has claimed it solely on the basis of penal interest allegedly illegally charged by the defendant No.1 bank.
31. The plaintiff has claimed recovery of Rs.7,32,368/- on two counts, one is charging of excess interest in contravention of the agreed terms and condition of sanction letters Ex.PW1/3(colly), Ex.PW1/4(colly) and Ex.PW1/5(colly) and secondly, charging of penal interest @ 1% and 2% per annum over and above the terms and condition of sanction. Though the plaintiff in its claim has not been clear in use of the aforesaid two terms distinctly and has often used the terms interchangeably using the term excess or excessive interest to include penal interest also, however, the calculation mentioned in the plaint reflects only two heads-penal interest charged and interest on penal interest charged. Even the legal notice dated 20.04.2018 Ex.PW1/20 sent by the plaintiff to the Digitally signed defendants mentions the term "penal interest" and mainly focuses by by MUKESH MUKESH KUMAR GUPTA KUMAR Date:
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mentioning the calculation for the suit amount of Rs.7,32,368/- with its breakup year-wise calling upon the bank to refund such amount which, as per the plaintiff, the defendant No.1 bank has charged arbitrarily and without any justifiable reason. Now if the evidence of the parties in this regard is carefully marshalled, the plaintiff vide its letter dated 21.06.2016 Ex.PW1/9 (colly), addressed to the Assistant General Manager of the defendant No.1 bank, has set out its claim showing the grievance to the Defendant No.1 bank regarding charging of excess interest for the first time. The plaintiff has further vehemently relied upon its letter dated 22.09.2017 Ex.PW1/16 (colly) wherein the plaintiff has calculated an interest to the tune of Rs.10,31,169/- for the period between FY 2013-14 to 2016-17 and raised the issue of charging of excess interest. However, it has not been per se specific in the entire letter regarding charging of penal interest @ 1% or 2% and has mentioned that the defendant No.1 bank has not provided any information or explanation for charging the interest over and above the sanctioned limit. The plaintiff has reiterated its claim of Rs.10,31,169/- towards excess interest charged vide its subsequent letters dated 14.06.2017 Ex.PW1/10(colly) and 21.06.2017 Ex.PW1/12, whereas the amount is increased to Rs.12,75,708/- in the letter dated 22.09.2017 Ex.PW1/16 (colly) and finally in the letter dated 24.12.2017 Ex.PW1/18(colly) which were sent to all the authorities including the General Manager of defendant bank.
32. Now, it is an admitted case of both the parties that the grant of cash credit facility was subject to agreement between the parties which can be Digitally signed by MUKESH KUMAR MUKESH KUMAR GUPTA reflected from the sanction letter Ex.PW1/3 (colly) to Ex.PW1/5(colly) and Date:
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CS (Comm.) No.554/2018 Radhe Radhe Fashions Studio Vs. Bank of India & Ors. Page no. 29 of 54 also admitted by PW-1 during his testimony. It is also an admitted fact that the credit facilities are for a specified term of one year at the express consent of the parties only and could not have been automatically renewed by either party as well. The defendant No.1 bank being Government Financial Institution is statutorily regulated by The Banking Regulation Act, 1949 (as amended up-to-date) and the rules and regulations framed by the Reserve Bank of India from time to time. Since the defendant bank is a government institution commercially free to negotiate its terms and conditions including charging of interest at higher rate within the maxima fixed under the aforesaid statutory frame work and guidelines of RBI, considering the economic capacity of borrower, its market rating and other conditions, section 21A of the Banking Regulation Act, 1949 also comes as a bar to any court looking into the rate of interest charged by a banking company on the ground that the same is excessive. The aforesaid statutory provision appears to have been enacted by the Parliament primarily to give more autonomy to the banking institutions and its customers to negotiate the terms and conditions freely in accordance with the changing market conditions and commercial interest in the interest of larger National economy. Though, Ld. Counsel for defendant has taken the objection under the aforesaid section for the first time during the course of final arguments, however, the said plea being a statutory plea, the same can be considered by the court even if it is taken during the course of final arguments.
Digitally signed33. Section 21A of the Banking Regulations Act, 1949, provides that:
by MUKESHMUKESH KUMAR GUPTA KUMAR Date: "notwithstanding anything contained in the Usurious GUPTA 2025.11.06 18:04:18 +0530 CS (Comm.) No.554/2018 Radhe Radhe Fashions Studio Vs. Bank of India & Ors. Page no. 30 of 54 Loans Act, 1918 (10 of 1918), or any other law relating to indebtedness in force in any State, a transaction between a banking company and its debtor shall not be re-opened by any Court on the ground that the rate of interest charged by the banking company in respect of such transaction is excessive."
34. The intent of legislature behind enacting the said section is that the court cannot re-open the account relating to a transaction between a Banking Company and its customers on the ground that the rate of interest charged, in the opinion of the court, is excessive or unreasonable, as far as the rate of interest is within the permissive limit and maxima fixed by the RBI vide its circulars/directions. However, the said transaction can be re-opened by the court, if the rate of interest charged by the bank exceeds the maxima fixed by the RBI. There is a distinction between court's power to interfere on the premise that the interest charged is excessive under the general law and the interest charged contravenes the circulars/directions issued by the RBI. In the former case, it would not be permissible in view of the bar imposed by the aforesaid section while in the latter case, it would be permissible as the Reserve Bank's circular and directions have statutory force under Section 21/35A of the Banking Regulation Act, 1949. Reliance placed on Corporation Bank Vs. D.S. Gowda and Ors. MANU/SC/0788/1994 and Central Bank of India Vs. Ravindra and Ors. MANU/SC/0663/2001.
Digitally signedMUKESH by MUKESH KUMAR GUPTA KUMAR Date:
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35. In the instant suit, the plaintiff claims the suit amount on the basis of excess interest charged by the defendants, however, careful perusal of the pleadings and documents produced on record shows that the plaintiff has used the terms 'excess' or 'excessive' interest to reflect charging of penal interest and interest charged thereon by the defendant No.1 bank and there is no case for seeking refund of excess interest beyond the agreed terms and conditions and the maxima fixed by the RBI. As such in view of the above discussion, the claim of the plaintiff shall be dealt accordingly.
36. Now adverting to the main contention of plaintiff that the defendant No.1 bank has failed to refund penal interest to the tune of Rs.7,32,368/- (out of a total penal interest of Rs.16,33,740/-) which includes interest on penal interest to the tune of Rs.3,58,032/- during the F.Y. 2013-14 to F.Y. 2016-17 on the cash credit facilities sanctioned vide Sanction Letters Ex. PW1/3 (colly) to Ex.PW1/5(colly), which has been charged @ 1% and 2% by the defendant No.1 bank arbitrarily, without any reasons and in contravention of the agreed terms and conditions of sanction.
37. Additionally, it has been contended that the bank has failed to give even a show cause notice to the plaintiff before imposing such penal interest despite the fact that the plaintiff has duly complied with all the terms and conditions of sanction including timely submission of stock Digitally statement/MSOD/QIS and thus plaintiff is entitled to recovery of the signed by outstanding penal interest charged by the defendant bank.
MUKESH
MUKESH KUMAR
KUMAR GUPTA
GUPTA Date:
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38. Per contra, the defendants have contended that the plaintiff has availed the aforesaid cash credit facilities and duly agreed to the terms and conditions of sanction letters issued by the defendant No.1 bank from time to time and whatever penal interest, including the interest charged thereon, has been charged by the defendant No.1 bank, the bank has strictly adhered to the terms of agreed terms and conditions of sanctioned loan facilities. It has further been contended that the plaintiff after enjoying the facilities for such a long time has used the same for its commercial gains and cannot now raise unnecessary issues that too when the defendant No.1 bank has neither violated any terms and conditions of the sanction nor the plaintiff has alleged any contention of personal vengeance against the defendant No.1 bank. The defendants have also disputed the calculation sheet filed by the plaintiff alongwith the Detailed Interest Report for Accounts Ex.PW1/7 (colly) and Detailed Interest Report for Accounts after surrender of CC Limit Ex.PW1/8 (colly) .
39. Now if the case of the plaintiff is examined in the light of documentary as well as oral evidence which has come on record, it is an admitted fact that the bank has charged a total penal interest of Rs.16,33,740/- which includes interest on penal interest as claimed and since there is no dispute regarding charging of the aforesaid amount as penal interest by the defendant bank from the plaintiff, the only question which remains for adjudication is whether this penal interest amount has been charged in contravention of the agreed terms and conditions of the facility/sanction granted by the defendant bank to the plaintiff from time to time vide sanctions Ex.PW1/3 (colly) to Ex.PW1/5(colly).
Digitally signed by MUKESHMUKESH KUMAR GUPTA KUMAR Date:
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40. Admittedly, the relation between the plaintiff and the defendant being commercial in nature, the same are governed by the contractual rights and obligations created by the contract namely the terms and conditions of sanction letters Ex.PW1/3(colly) to Ex.PW1/5(colly). As per plaintiff, there is absolutely no reason for charging penal interest by the defendant No.1 bank which has been charged arbitrarily and without any justification despite the fact that there has been due compliance of the agreed terms and conditions by the plaintiff, while on the other hand, the defendant No.1 bank has justified its action on the same terms and conditions of sanctions explaining the same and relied heavily upon its letter dated 17.10.2017 Ex.PW1/17 (colly) written by the defendant bank in response to the plaintiff's letter dated 22.09.2017 Ex.PW1/16 (colly). The plaintiff has then relied upon its rejoinder letter dated 24.12.2017 Ex.PW1/18 (colly) written not only to the AGM of the Karol Bagh Branch of the defendant but also to the General Manager, Zonal Manager and even the Managing Director of the defendant bank.
41. The relevant terms and conditions for imposition and charging of penal interest as per Sanction Letters Ex.PW1/3, Ex.PW1/4 and Ex.PW1/5 are reproduced for clarity :
Sanction Letter dated 22.07.2013 (credit facility valid uptil 17.07.2014):
Annexure II Other Terms and Conditions & Covenants etc. application to the sanctioned facility (IES) :Digitally signed
MUKESH by MUKESH KUMAR 1. ......
GUPTA KUMAR
10. The firm/company is required to submit QIS I, II & Date:
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III returns. QIS I (showing estimates) is required to be submitted in the week preceding the commencement of the quarter to which it relates, QIS II (showing performance) within six weeks from the close of the quarter to which the statement relates and QIS III (half yearly operating statement) within two months from the close of the half-year.
The firm has to submit statement of stocks as well as Monthly Select Operational Data (MSOD) every month latest by 10th of the following month. Any delay without specific approval from the bank will attract penal rate of 1%p.a. for the delayed period. If statements are not submitted for continuous period of 3 months, penal interest @ 2% р.а. will be recovered as per the guidelines of the bank. Bank may also initiate further action as deemed necessary by the Bank.
12. The firm/Company to declare/undertake to us:
to supply to us, audited financial statements of the firm/company within 6 months from closure of financial year. Any delay in submitting these audited financial statements without our specific approval will attract penal interest @1%p.a. In case these statements are not received by us for a continuous period of 3 months, the bank may take further action as deemed fit by the bank.
to provide to us promptly information (along with comments/explanation) about all material and adverse changes in your project/business, ownership, management, liquidity, financial position etc. Digitally signed by that any liabilities or obligations under the facilities MUKESH MUKESH KUMAR KUMAR GUPTA shall not, at any time, rank postponed in point and security to GUPTA Date:
2025.11.06 18:04:48 any other obligation or liabilities to other lending institutions +0530 CS (Comm.) No.554/2018 Radhe Radhe Fashions Studio Vs. Bank of India & Ors. Page no. 35 of 54 or banks or creditors, unless expressly agreed or permitted by bank.
not to create or permit to subsist any mortgage, charge (whether floating or specific), pledge, lien or other security interest on any of your undertakings, properties or assets, without our prior consent in writing. The firm will maintain adequate net working capital at all times to meet margin requirements as per bank's guidelines.
23. Audited financial statements to be submitted within six months from the close of the financial year failing which penal interest at 1% p.a. up to 3 months and thereafter at 2% p.a. will be charged till date of submission.
24. Penal interest of 2% p.a. will be levied on the overdue amount for the period account remains overdrawn due to irregularities such as non payment of interest immediately on application, non payment of installments within one month of their falling due, reduction in drawing power/limit, excess borrowings due to over limit/ devolvement of L/C/ invocation of Guarantee etc. If the account continues to be overdrawn for a period of 90 days, the bank may consider initiation of other action also as deemed fit by the bank.
25. Any default in complying with terms of sanction within the stipulated time will attract penal interest of 1% p.a. from the date of expiry of such time.Digitally signed
MUKESH by MUKESH KUMAR GUPTA
26. In case of default either in the payment of interest, the KUMAR Date:
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+0530
payable or reimbursement of all costs, charges and the CS (Comm.) No.554/2018 Radhe Radhe Fashions Studio Vs. Bank of India & Ors. Page no. 36 of 54 expenses when demanded, you shall pay additional interest at the rate of 2% above the interest rate for the facilities on the overdue interest, costs, charges or expenses and/or from the respective due dates for payment and/or repayment.
27. CMA data to be submitted at least one month before the due date of review. Any delay without specific approval from the bank will attract penal rate @1% p.a. In case CMA data is not submitted for a continuous period of three months, penal interest @ 2% p.a. will be charged till date of submission and the bank may also take further action as deemed fit by the Bank.
28. The company/firm to ensure submission of statement of Assets & Liabilities in Bank's format CBD - 23 (duly certified by a C.A.) along with copies of Income Tax and Wealth Tax returns/assessment orders of all the directors and guarantors every year.
53. The Bank carries out the credit rating exercise every year when the facilities are reviewed. However, it reserves the right to carry out the credit rating exercise of the facilities at frequencies considered necessary and the rate of interest chargeable to the facilities would depend upon the rating obtained by the borrowing firm/Company. ........
Sanction Letter dated 12.11.2014 (credit facility valid uptil 31.03.2015):
Digitally signed by MUKESHMUKESH KUMAR Annexure II
GUPTA
KUMAR Date:
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Other Terms and Conditions & Covenants etc.
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CS (Comm.) No.554/2018 Radhe Radhe Fashions Studio Vs. Bank of India & Ors. Page no. 37 of 54
application to the sanctioned facility (IES) :
1. ......
10. The firm/company is required to submit QIS I, II & III returns. QIS I (showing estimates) is required to be submitted in the week preceding the commencement of the quarter to which it relates, QIS II (showing performance) within six weeks from the close of the quarter to which the statement relates and QIS III (half yearly operating statement) within two months from the close of the half-year.
The firm has to submit statement of stocks as well as Monthly Select Operational Data (MSOD) every month latest by 10th of the following month. Any delay without specific approval from the bank will attract penal rate of 1%p.a. for the delayed period. If statements are not submitted for continuous period of 3 months, penal interest @ 2% р.а. will be recovered as per the guidelines of the bank. Bank may also initiate further action as deemed necessary by the Bank.
12. The firm/Company to declare/undertake to us:
to supply to us, audited financial statements of the firm/company within 6 months from closure of financial year. Any delay in submitting these audited financial statements without our specific approval will attract penal interest @1%p.a. In case these statements are not received by us for a continuous period of 3 months, the bank may take further action as deemed fit by the bank.
to provide to us promptly information (along with Digitally MUKESH signed by MUKESH KUMAR comments/explanation) about all material and adverse KUMAR GUPTA GUPTA Date:
2025.11.06 changes in your project/business, ownership, management, 18:05:08 liquidity, financial position etc. +0530 CS (Comm.) No.554/2018 Radhe Radhe Fashions Studio Vs. Bank of India & Ors. Page no. 38 of 54 that any liabilities or obligations under the facilities schall not, at any time, rank Annexurepostponed in point and security to any other obligation or liabilities to other lending institutions or banks or creditors, unless expressly agreed or permitted by bank.
not to create or permit to subsist any mortgage, charge (whether floating or specific), pledge, lien or other security interest on any of your undertakings, properties or assets, without our prior consent in writing. The firm will maintain adequate net working capital at all times to meet margin requirements as per bank's guidelines.
23. Audited financial statements to be submitted within six months from the close of the financial year failing which penal interest at 1% p.a. up to 3 months and thereafter at 2% p.a. will be charged till date of submission.
24. Penal interest of 2% p.a. will be levied on the overdue amount for the period account remains overdrawn due to irregularities such as non payment of interest immediately on application, non payment of installments within one month of their falling due, reduction in drawing power/limit, excess borrowings due to over limit/ devolvement of L/C/ invocation of Guarantee etc. If the account continues to be overdrawn for a period of 90 days, the bank may consider initiation of other action also as deemed fit by the bank.
25. Any default in complying with terms of sanction within the stipulated time will attract penal interest of 1% p.a. from the date of expiry of such time.Digitally signed
MUKESH by MUKESH KUMAR GUPTA
26. In case of default either in the payment of interest, the KUMAR Date:
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repayment of the principal amounts as and when due and payable or reimbursement of all costs, charges and the CS (Comm.) No.554/2018 Radhe Radhe Fashions Studio Vs. Bank of India & Ors. Page no. 39 of 54 expenses when demanded, you shall pay additional interest at the rate of 2% above the interest rate for the facilities on the overdue interest, costs, charges or expenses and/or from the respective due dates for payment and/or repayment.
27. CMA data to be submitted at least one month before the due date of review. Any delay without specific approval from the bank will attract penal rate @1% p.a. In case CMA data is not submitted for a continuous period of three months, penal interest @ 2% p.a. will be charged till date of submission and the bank may also take further action as deemed fit by the Bank.
.......
Sanction Letter for Financial Year 2016-17 (credit facility valid uptil 30.06.2017):
Annexure II All other Terms and Conditions & Covenants, including security (principal & Collateral), etc. applicable to the proposed facilities :
1. ......
4. Stock/book-debt statements are to be submitted at a frequency stipulated by the Bank (monthly) alongwith select operational data (MSOD) in bank's prescribed formats.
Valuation of stocks to be done at cost/invoice/market price whichever is lower. Non-submission of stock/book-debts and MSOD statements by 10th of the succeeding month will attract penal interest @ 1% p. a. If these statements are not submitted for a continuous period of 3 months. Bank may initiate further action as deemed necessary by the Bank.
9. Penal interest of 2% p.a. will be levied on the overdue Digitally signed by MUKESH MUKESH KUMAR KUMAR GUPTA Date:
amount for the period account remains overdrawn due to 2025.11.06 GUPTA 18:05:20 +0530 irregularities such as non payment of interest immediately on CS (Comm.) No.554/2018 Radhe Radhe Fashions Studio Vs. Bank of India & Ors. Page no. 40 of 54 application, non payment of installments within one month of their falling due, reduction in drawing power/limit, excess borrowings due to over limit. devolvement of L/C, invocation of Guarantee etc. If the account continues to be overdrawn for a period of 90 days, the bank may consider initiation of other action also as deemed fit by the bank.
10. Any default in complying with terms of sanction within the stipulated time will attract penal interest of 1% p.a. from the date of expiry of such time.
16. In case of default either in the payment of interest, the repayment of the principal amounts as and when due and payable or reimbursement of all costs, charges and the expenses when demanded, you shall pay additional interest at the rate of 2% above the interest rate for the facilities on the overdue interest, costs, charges or expenses and/or from the respective due dates for payment and/or repayment.
17. The Company is required to submit QIS I, II & III returns. QIS I (showing estimates) is required to be submitted in the week preceding the commencement of the quarter to which it relates. QIS II (showing performance) within 6 weeks from the close of the quarter to which the statement relates and QIS III (half yearly operating statement) within two months from the close of the half - year. Any delay without specific approval from the bank will attract penal rate of 1% pa for the delayed period.
18. CMA data to be submitted at least one month before the due date of review Any delay without specific approval from the bank will attract penal rate @1%p.a. In case CMA data is Digitally signed by MUKESH not submitted for a continuous period of three months, the MUKESH KUMAR KUMAR GUPTA Date: bank may take further action as deemed fit by the Bank.
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CS (Comm.) No.554/2018 Radhe Radhe Fashions Studio Vs. Bank of India & Ors. Page no. 41 of 54
21. Company to declare/undertake to us:
to supply to us, audited financial statements of the Company within 6 months from closure of financial year. Any delay in submitting these audited financial statements without our specific approval will attract penal interest @1% p.a. In case these statements are not received by us for a continuous period of 3 months. the bank may take further action as deemed fit by the bank.
40. The Bank has assessed the working capital limits of the company as Rs.430.00 Lakh for WCFBL.
41. The reduced amount of Rs.1.20 Crore to be repaid in 12 monthly installments of Rs.10.00 Lakhs each commencing from the 31.07.2016 till it reaches the sanctioned limit of Rs.4.30 Crore.
........
42. Before proceeding further, it is pertinent to mention here that the Ex.PW1/5(colly) is undated and bears no acknowledgement on behalf of plaintiff company. Though, the plaintiff in the evidence of PW-1 Tarsem Lal Batra has tried to use the word 'offered' instead of 'an agreed contract', however, the plaintiff has duly exhibited the aforesaid document in support of its case as Ex.PW1/5(colly). Further, the plaintiff in its letter dated 02.08.2016 Ex.PW1/11 (colly) has duly accepted the aforesaid terms and conditions by showing gratitude from the core of his heart to the defendant No.1 bank, at the same time, requesting not to reduce the cash credit limit of Rs.550 lacs to Rs.430 lacs referring to old and continued relation with the bank and citing its difficulties which have come on the way. The plaintiff has even offered to provide additional Digitally signed by MUKESH MUKESH KUMAR collaterals besides its already provided collateral property situated in KUMAR GUPTA Date:
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CS (Comm.) No.554/2018 Radhe Radhe Fashions Studio Vs. Bank of India & Ors. Page no. 42 of 54
Phagwada, District Kapurthala, Punjab in the name of one of its Director Neelam Batra. As such, the plaintiff has duly agreed to the terms and conditions of the sanction for the financial year 2016-17 vide Ex.PW1/5(colly). This fact is further corroborated from the letter dated 24.11.2016 of the defendant No.1 bank Ex.PW1/6 whereby which the request so made by the plaintiff vide Ex.PW1/11 (colly) was declined by the defendant No.1 bank and yet neither the plaintiff discontinued with the cash credit facility nor even protested against such refusal of the defendant No.1 bank by writing any letter pursuant to Ex.PW1/6 for its restoration of limits.
43. Now if the aforesaid terms and conditions of sanction are carefully analyzed, it down the obligations and document submissions which the plaintiff is required to comply with from time to time with strict timelines and even prescribes consequences of non-compliance in the form of imposition of penal interest @ 1% or 2% for the period of delay, continued delay beyond a period and even withdrawal of cash credit facility if the default continues. The plaintiff on its part has heavily relied upon letter dated 22.09.2017 Ex.PW1/16(colly) to show due compliances in respect of submission of data including renewal data as provided under the terms and conditions of sanction Ex.PW1/3(colly) to Ex.PW1/5(colly) [more specifically Ex.PW1/4(colly) for the period to which the letter pertains]. However, it may be seen that this document is not an admitted document by the defendants and as such, the onus to prove the same lies Digitally signed by on the plaintiff who has to prove not only the existence of this document MUKESH MUKESH KUMAR KUMAR GUPTA Date:
but also the contents thereof including the veracity of such contents by GUPTA 2025.11.06 18:05:40 +0530 CS (Comm.) No.554/2018 Radhe Radhe Fashions Studio Vs. Bank of India & Ors. Page no. 43 of 54 way of either primary or at best by leading secondary evidence. If the primary evidence is seen, the letter has been signed by the Director of the plaintiff Ms. Neelam Batra, who has failed to enter the witness box. Even if it is considered that the existence of the letter is proved by way of the evidence of PW-1 Tarsem Lal Batra who is also one of the Directors of the plaintiff company duly authorized to depose on behalf of the plaintiff company even then the contents thereof have not been proved by way of any cogent evidence. It may be seen that the letter mentions that renewal data was submitted in the branch of the defendant No.1 bank in the month of November 2015 for renewal which became due in November 2015 only, however, no such acknowledgment of submission of such data has been brought to the notice of the Court or has been duly proved in accordance with law. The plaintiff has further failed to show on record the compliance of Clause 10 of Ex.PW1/3 (colly) and Ex.PW1/4(colly) and clause 4 and 17 of Ex.PW1/5(colly) to show submission of stock statements/QIS/MSOD in time thereby entailing the penal interest. As such, when taken on the yardstick of preponderance, Ex.PW1/16 (colly) cannot be called a letter showing due compliance of the terms and conditions of the sanction letters so much to refute the imposition of penal interest by the defendant bank in accordance with agreed terms and conditions of sanction.
44. The plaintiff has then relied upon the Statement of Account Ex. PW1/14(colly) and table/calculation sheet Ex.PW1/15(colly) which are alleged to be prepared from the Statement of Account of the bank Digitally signed by MUKESH KUMAR MUKESH KUMAR GUPTA Ex.PW1/7 (colly) and Ex.PW1/8 (colly), however, most of the Date:
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CS (Comm.) No.554/2018 Radhe Radhe Fashions Studio Vs. Bank of India & Ors. Page no. 44 of 54 corresponding entries as mentioned in Ex.PW1/15(colly) (as drawn by the plaintiff), when compared with Ex.PW1/7(colly) and Ex.PW1/8(colly), do not match with each other and as such the aforesaid table and calculation sheet cannot be called sufficient enough to prove the contention of plaintiff in view of Section 34 of Indian Evidence Act, 1872.
45. The plaintiff has also relied upon the testimony of its sole witness PW1 Tarsem Lal Batra and also its various communications made to the defendant No.1 bank right from its first letter dated 21.06.2016 Ex.PW1/9 (colly) to its detailed letter dated 22.09.2017 Ex.PW1/16 (colly) besides letters dated 24.12.2017 Ex.PW1/18 (colly) written to all the Authorities uptil the level of Managing Director of the defendant No.1 bank in support of its case to show that the penal interest was imposed by the bank unjustifiably and without any reasons, in other words, to show that there has always been due compliances by the plaintiff of the terms and conditions of sanctions issued by defendant No.1 bank from time to time. The plaintiff has made this endevour to seek refund of penal interest during subsistence of credit facility which in itself is an admission of the knowledge of the plaintiff about imposition of penal interest by the defendant No.1 bank which was sought to be withdrawn/refunded by several requests. Pertinently, it is a matter of record that despite these requests, neither the same was withdrawn or refunded nor the terms and conditions of the Cash Credit Facilities were Digitally MUKESH signed by MUKESH KUMAR modified. The turn of events evidently shows that these letters, KUMAR GUPTA Date:
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vehemently relied upon by the plaintiff, were actually in the nature of requests/persuasion seeking modifications of terms and conditions of CS (Comm.) No.554/2018 Radhe Radhe Fashions Studio Vs. Bank of India & Ors. Page no. 45 of 54 Cash Credit Facility or the withdrawal of penal interest to its benefit. If the plaintiff was actually aggrieved and also had the knowledge of imposition of penal interest, nothing has stopped the plaintiff from either withdrawing the cash credit facilities extended by the defendant No.1 bank by terminating the commercial contractual obligations under the sanctions Ex.PW1/3(colly) to Ex.PW1/5(colly) renewed from time to time or offering or show due compliances to the bank for withdrawal of penal interest. Evidently, nothing has come on record in the form of evidence to show that the plaintiff has either submitted its stock statements/MSOD/QIS in time or submitted its requisite renewal data and information in time. It is a consistent stand of the defendants which has remained unrefuted by the plaintiff that the representative of the plaintiff Mr. Deepak Kumar Sharma was constantly dealing with the defendant No.1 bank in respect of these facilities on day to day basis. It is also an unrefuted stand of the defendant No.1 bank that the aforesaid representative Sh. Deepak Kumar Sharma was duly informed about the delay in the submission of these data from time to time. Even PW-1 during his cross-examination before the Court, has admitted that the factum of irregularities in submission of stock statement was informed to him by the bank officials, though he has then tried to cover it by volunteering stating that he has been submitting his stock statements regularly. Further, Ex.PW1/17 (colly), which is the letter dated 17.10.2017 written by the defendant bank to the plaintiff in response to its letter dated 22.09.2017 Ex.PW1/16 (colly), clearly mentions that the Digitally signed by MUKESH MUKESH KUMAR KUMAR GUPTA GUPTA Date:
2025.11.06 calculations in respect of the interest charged has been duly verified by 18:05:58 +0530 the aforesaid Deepak Kumar who has also been satisfied about the same.
CS (Comm.) No.554/2018 Radhe Radhe Fashions Studio Vs. Bank of India & Ors. Page no. 46 of 54 The rejoinder of the plaintiff Letter dated 24.12.2017 Ex.PW1/18 (colly) also does not refute this fact anywhere in the letter. Rather, the plaintiff has mentioned about some short term renewal of these facilities, though nothing in respect thereof has even been proved on record. The aforesaid primary witness Sh. Deepak Kumar Sharma has failed to enter the witness box despite being mentioned in the list of witnesses and rather was given up by the plaintiff before the Court on 05.01.2023.
46. Trite to add that despite such unredressed grievances, the plaintiff continued with the cash credit facility and rather renewed the same twice even after the factum of imposition of penal interest by the defendant No.1 bank has duly come to its notice. The sole witness of the plaintiff PW-1 Sh. Tarsem Lal Batra who is one of the Directors of the plaintiff company and who has exhibited these documents on record, did not bring to the notice of the Court any document or even by way of oral testimony to show that the plaintiff has made due compliances of the terms and conditions of the facilities extended by the defendant No.1 bank within the stipulated time. It is a matter of fact that no document has come on record to show that QIS/Stock statement/MSOD or the renewal data was submitted by the plaintiff to the defendant No.1 bank within the time frame despite the deadlines being specifically mentioned in each Sanction Letter. Pertinent to mention here that the consequences of non submission of the aforesaid data including renewal data in the form of Digitally imposition of penal interest @ 1% per annum for initial period and 2% signed by MUKESH MUKESH KUMAR KUMAR GUPTA Date:
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per annum after lapse of certain period provided under the terms of sanctions. The plaintiff has failed to bring on record any document CS (Comm.) No.554/2018 Radhe Radhe Fashions Studio Vs. Bank of India & Ors. Page no. 47 of 54 showing any acknowledgment of these submissions in time and has merely relied upon the repeated communications/letters to buttress its case for refund of excess penal interest. Even during the course of lengthy arguments, Ld. Counsel for the plaintiff has merely relied upon these letters written by the plaintiff from time to time rather than referring to any actual acknowledgment or documents refuting or controverting the justification given by the defendants in their letter dated 17.10.2017 Ex.PW1/17 (colly). Furthermore, if all these letters are carefully construed, they are more or less mentioning the facts and circumstances regarding the plaintiff being and established commercial institutions having relationship with the defendant No.1 bank with last 40 years, raising the issue of stiff competition, while also mentioning the charging of penal interest. However, no document has been brought on record to show that the penal interest was charged by the defendant No.1 bank in contravention of the terms and conditions agreed upon between the parties in the Sanction Letters (Ex.PW1/3(colly) to Ex. PW1/5(colly)).
47. Thus, taken on yardsticks of preponderance of probabilities and on the basis of the discussion aforesaid, these documents heavily relied upon by the plaintiff actually does not come to its rescue, so as to make out its entitlement to the amount claimed.
48. Now adverting to the plea of the plaintiff that the account books have not been annually audited by the concurrent auditor to be appointed Digitally by the defendant No.1 bank is concerned, the plaintiff has relied upon signed by MUKESH MUKESH KUMAR KUMAR GUPTA clause 34 and 37 of Ex.PW1/3 (colly) and Ex.PW1/4 (colly). The Date:
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CS (Comm.) No.554/2018 Radhe Radhe Fashions Studio Vs. Bank of India & Ors. Page no. 48 of 54 corresponding relevant clauses are reproduced here-in-under:
"34. The receivable Audit will be done at annual intervals by stock auditors appointed by the bank at the cost of the firm.
37. Books of the firm will be inspected quarterly interval by the bank's representative. The firm shall provide assistance to the aforesaid representative in conducting and completing such inspection smoothly.
49. The onus to prove that the defendants have failed to comply with the aforesaid clauses was upon the plaintiff. The plaintiff has contended that in terms of Clause 34 and 37 of Ex.PW1/3(colly) and Ex.PW1/4 (colly), the bank was required to undertake the process of audit at annual intervals by stock auditors to be appointed by the bank at the cost of the firm and has even referred to letter dated 24.12.2017 Ex.PW1/18 (colly) to contend that since no infirmities were shown by concurrent auditor regarding undercharging of interest, the bank has failed to justify its action in charging of penal interest. Though the plaintiff has failed to bring any clear and cogent evidence to support the aforesaid arguments, however, the defendant in its pleadings as also during evidence of DW1 Nikki Tyagi has clearly stated that the books of accounts of the bank are audited by concurrent auditor which have been restricted to 75% and then 50% as per the RBI guidelines. The defendants have been categoric in mentioning that the verification of records was duly done by the bank after audit and pursuant to which, a sum of Rs.9,01,372/- was also refunded to the plaintiff and there was no justification for claiming the Digitally signed by MUKESH KUMAR MUKESH KUMAR GUPTA amount of Rs.7,32,368/-. This contention of the defendant bank has GUPTA Date:
2025.11.06 18:06:18 +0530 CS (Comm.) No.554/2018 Radhe Radhe Fashions Studio Vs. Bank of India & Ors. Page no. 49 of 54 remained unrefuted by the plaintiff. Imperatively, since the plaintiff has tried to raise this issue for proving that no infirmities were found in the accounts of the plaintiff, it was required to at least prove the same by either filing its own audit report undertaken by any independent auditor or at least required to show as to how the accounts of the plaintiff were strictly in accordance with the terms and conditions of the agreement between the parties Ex.PW1/3(colly) to Ex.PW1/5(colly). The plaintiff has though taken this plea, however, has failed to prove the same by way of any cogent evidence on the yardstick of preponderance of probabilities and in such eventuality the assertion becomes nothing but bald assertion and cannot be relied upon.
50. Finally, adverting to the last ground of the plaintiff regarding requirement of issuance of a show cause notice by the defendants before imposition of penal interest on the facilities. Ld. Counsel for plaintiff has vehemently argued that no showcause notice or intimation was ever given by the defendant bank before imposing penal penal interest @ 1 % or 2 % in the account the defendant No.1 bank has not only failed to abide by the aforesaid of the plaintiff from time to time which it was required to do making it unsustainable and arbitrarily. To buttress the aforesaid arguments, Ld. Counsel for plaintiff has relied upon Clause 48(a) of the sanction letter dated 22.07.2013 Ex.PW1/3 (colly) and cross examination of DW-1 Nikky Tyagi who during cross examination has affirmed that generally bank issues notice to its customers with respect to levy / charging of interest, penal interest and any other interest whatsoever by the bank. Ld. Counsel for defendants have vehemently Digitally signed by MUKESH MUKESH KUMAR GUPTA KUMAR Date:
GUPTA 2025.11.06 18:06:24 +0530 CS (Comm.) No.554/2018 Radhe Radhe Fashions Studio Vs. Bank of India & Ors. Page no. 50 of 54 argued that there is no legal obligation or requirement of the defendant No.1 bank to mandatorily do so. If the documents, more particularly the sanction orders Ex. PW-1/3(colly) to Ex. PW-1/5(colly) are carefully perused, it may be seen that none of the aforesaid sanction order prescribes any such procedure to be followed. On the contrary, the stipulations of clause 10, 12, 24, 25, 26 and 27 are specific about the conditions under which penal interest may be charged by the bank. It may be seen that these stipulations even provide the circumstances with timelines within which in case of failure to do certain acts, the bank has been given right to impose penal interest or enhanced penal interest and in some cases to take further actions as deem necessary by the bank. Even Clause 48(a) of the terms and conditions of sanction Ex.PW1/3(colly) is to be seen in the context in which it has been provided. It may be seen that the bank being a nationalized bank governed under the Banking Regulations Act, 1949 is strictly bound by the guidelines issued by the Reserve Bank of India from time to time including regulating the interest component as per the requirements of national economy. Clause 48(a) perceives a situation where the rate of interest or any other terms and conditions of any commercial agreement by any nationalized bank are changed by such regulations of RBI and not the condition of violation of any terms and conditions of existing agreement between the bank and its customers. The use of the term 'entitled to notify' in Clause 48(a) has to be read in contradistinction to the term 'obligation to notify' which has been consciously excluded from the terms and conditions of agreement Ex.PW1/3(colly) to MUKESH by Digitally signed MUKESH KUMAR GUPTA Ex.PW1/5(colly). Furthermore, since the transaction between the KUMAR Date:
2025.11.06 GUPTA 18:06:30 +0530 CS (Comm.) No.554/2018 Radhe Radhe Fashions Studio Vs. Bank of India & Ors. Page no. 51 of 54 defendant and plaintiff is commercial in nature and the rights and obligations of each party have been duly laid down in the agreement / sanction letter which does not provide for any show cause notice before charging any penal interest, the statement of DW-1 duly cross examination has to be read with sanction letters Ex. PW-1/3 (colly) to Ex. PW-1/5(colly) and use of the expression 'generally', which means that it was the discretion of the bank to issue or not to issue notice / intimation to its customers in circumstances as explained above within the purview of the phrase 'entitled to' used in Clause 48(a). It is not the case of the plaintiff that it was only the plaintiff who was excluded from such requirements on account of some malafides or vested interest of a particular bank official. Even PW-1 Tarsem Lal Batra during cross- examination has admitted that the plaintiff has no personal dispute with any of the bank officials. It is not the case of the plaintiff that the defendant No.1 bank has not been cooperating with the plaintiff in operation of its term loan and credit facility account. On the contrary, the repeated letters more particularly the much relied letter dated 22.09.2017 Ex. PW-1/16 (colly) relied upon by the plaintiff specifically mention the acknowledgment of cooperation by the defendant bank. Nothing specific regarding requirements of issuance of show cause notice or even instances where such notice has been issued to other customers to the exclusion of the plaintiff has been brought to the notice of the Court by way of any documentary or even any oral evidence. Thus, taken on the yardstick of preponderance, the stand taken by the plaintiff is also not Digitally signed by legally tenable and is liable to be rejected.
MUKESH
MUKESH KUMAR
KUMAR GUPTA
Date:
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CS (Comm.) No.554/2018 Radhe Radhe Fashions Studio Vs. Bank of India & Ors. Page no. 52 of 54
51. In view of the aforesaid comprehensive factual and legal discussion and taken on the yardstick of preponderance of probabilities, the plaintiff has failed to prove its entitlement to the suit amount of Rs.7,32,368/- by discharging the onus conferred upon his shoulders. This issue is, accordingly, decided against the plaintiff and in favour of the defendants.
Issue No. 3: "Whether the plaintiff is entitled to the interest, if so, at what rate and for which period ? OPP
52. The onus of proving this issue was also held upon the plaintiff. However, when the plaintiff has failed to prove his entitlement to the suit amount as determined in issue No.2 on the yardstick of preponderance of probabilities, the plaintiff shall not be also entitled to any interest also. This issue is, accordingly decided against the plaintiff and in favour of defendants.
(J) CONCLUSION:-
Issue No. 4: "Relief"
53. In view of the aforesaid discussions and findings of the court on the aforesaid issues, the court is of the considered opinion that the plaintiff has not been able to successfully prove its entitlement to recovery of Rs.7,32,368/- as claimed by the plaintiff against the defendants. The suit of the plaintiff is, accordingly dismissed.
Digitally signed54. In the specific facts and circumstances of the case, parties are left by MUKESH MUKESH KUMAR GUPTA KUMAR Date:
GUPTA 2025.11.06 to bear their own respective costs.
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55. Decree sheet be drawn accordingly.
56. File be consigned to record room after due completion.
Digitally signedMUKESH by MUKESH KUMAR GUPTA KUMAR Date:
PRONOUNCED IN OPEN COURT GUPTA 2025.11.06 18:06:50 +0530 On this 6th NOVEMBER, 2025 (MUKESH KUMAR GUPTA) DISTRICT JUDGE (COMM. COURT)-07 CENTRAL/DELHI(pk) CS (Comm.) No.554/2018 Radhe Radhe Fashions Studio Vs. Bank of India & Ors. Page no. 54 of 54