Delhi District Court
Punjab National Bank vs Sh. Mukul Sharma on 16 August, 2022
In the Court of Shri Sanjiv Jain, District Judge,
(Commercial Court-03), Patiala House Courts New Delhi
CS (Comm) No. 326/2020
Punjab National Bank
ECE House, 28A,
K. G. Marg, New Delhi
....... Petitioner
versus
1. Sh. Mukul Sharma
R/o Flat No. 157, Ground Floor,
DDA Harmony Apartment, Sector-4,
Pocket-1, Dwarka, New Delhi.
2. Sh. Rajiv Dixit,
Punjab National Bank,
C-3/55A, Yamuna Vihar, Delhi
3. Sh. Ramesh Chand,
Chief Manager, CPDC,
Punjab National Bank,
Servicing Clearing Branch,
Paharganj, Desh Bandhu Gupta Road,
New Delhi ....... Respondents
Date of institution : 18.03.2020 Date of reserving judgment : 16.08.2022 Date of decision : 16.08.2022 CS (Comm) No. 326/20 PNB & VS. Mukul Sharma & Ors Page No.1 of 18 JUDGME NT
1. This suit for recovery of a sum of Rs. 5,19,071/- along with interest @ 12% per annum with monthly rests has been filed by the plaintiff Punjab National Bank against the defendants Mukul Sharma & Ors on the premises that on 15.01.2004, defendant no. 1, employee of the plaintiff had approached the plaintiff for an housing loan to purchase a Flat bearing No. 157, Ground Floor, SFS, Category III, Pocket I, Sector 4, Dwarka, Delhi under staff category for Rs. 10.00 lakhs vide loan application dated 15.01.2004. He also applied for an over draft facility under staff category for Rs. 4.50 lakhs vide application dated 24.11.2005. The plaintiff after scrutiny of documents, sanctioned the home loan and over draft facility vide dated 05.02.2004 & 20.03.2006. Defendant nos. 2 & 3 stood as guarantors for defendant no. 1 in respect of the housing loan. Defendant no. 1 executed the loan documents and the defendant nos. 2 & 3 executed the agreement of guarantee. It was stipulated in the agreement that in case of default, defendant no. 1 would be liable to pay additional interest @ 2% per annum. Both the loans were payable in installments @ Rs. 7785/- per month carrying interest @ 12% per annum with monthly rests, which was subject to change as per RBI Guidelines. The bank disbursed the loan to defendant CS (Comm) No. 326/20 PNB & VS. Mukul Sharma & Ors Page No.2 of 18 no. 1 after opening loan account nos. 112000LH00000084 & 11200095000001364 at the branch ECE House, 28A, K G Marg, New Delhi.
2. It is alleged that the defendant no. 1 failed to honour his undertaking / commitments in payment of monthly installments. His account was declared as NPA on 21.01.2016. It requested the defendant no. 1 to repay the loan amount / over draft facility / regularize the accounts but he failed. It is alleged that defendant nos. 2 & 3 also failed to fulfill their promises. This made the plaintiff send a legal / demand notice dated 08.01.2020 to pay the outstanding amount along with accrued interest but they did not.
3. It is alleged that the plaintiff has been maintaining accounts in the normal course of business and the books of accounts show debit balance of Rs. 2,30,262/- and Rs. 1,57,032/- in the respective loans accounts / over draft facilities as on date exclusive of interest w.e.f. 20.02.2017 to 31.03.2020 amounting to Rs. 1,31,777/-.
4. Summons of the suit were sent to the defendants. Despite service, defendant no. 1 did not appear on any of the dates. Defendant nos. 2 & 3 filed their written statement alleging that they had stood surety for the housing loan and not for the over CS (Comm) No. 326/20 PNB & VS. Mukul Sharma & Ors Page No.3 of 18 draft facilities while the suit is against both the loans. It is alleged that plaintiff had sufficient opportunity to recover the loan from defendant no. 1 during his service period but it deliberately neglected. It is stated that as per Annexure 4 at Page 75 of the plaintiff's documents, it was the duty of the plaintiff to obtain title deed of the flat from the borrower immediately on its execution to create equitable mortgage and the liability of the sureties was till the creation of the equitable mortgage, which the plaintiff failed. It is stated that the defendant no.1 had to mortgage / pledge the title deed of the flat within 30 days from the date of the execution of the title deed. It is also stated that the plaintiff could recover the amount from the salary / funds / gratuity etc mentioned at Page 98 of the documents of the plaintiff but it deliberately omitted.
5. The plaintiff filed the replication to the written statement alleging that defendant nos. 2 & 3 had stood surety / guarantors for the defendant no. 1 and have the same liability as that of defendant no. 1. It is stated that the defaults committed by defendant no. 1 in repayment of EMIs were duly communicated to defendant nos. 2 & 3 but they did not take any action. It denied the other averments made in the written statement and stated that defendants are liable to pay the amount.
6. In this case, this Court vide order dated 14.01.2021 after CS (Comm) No. 326/20 PNB & VS. Mukul Sharma & Ors Page No.4 of 18 hearing the Counsels for the plaintiff and defendant nos. 2 & 3 granted ad-interim injunction in favour of the plaintiff and against the defendants restraining them from creating any 3 rd party interest in respect of the aforesaid property till the disposal of the suit.
7. From the pleadings of the parties, following issues were framed vide order dated 14.01.2021.
1. Whether the plaintiff is entitled for a sum of Rs. 5,19,017/ as prayed for in prayer clause 21 (1) ? OPP
2. Whether the plaintiff is entitled to interest, if so at what rate and from which period? OPP
3. Relief.
8. To prove its case, plaintiff examined Sh. Darshan Kumar Sharma, its Chief Manager as PW1. He tendered his affidavit Ex. PW1/1 in evidence and placed on record the documents.
9. The defendant nos. 2 & 3 in their defence examined Sh.
Rajeev Dixit as DW1, Sh. Ramesh Chand as DW2 and Sh. Sanjeev Kumar Thakur as DW3.
10. I have heard the arguments advanced by Ld. Counsel Sh.
Parikshit Mahipal for the plaintiff and Ms. Sandhya Sharma, Ld. Counsel for defendant nos. 2 & 3.
CS (Comm) No. 326/20 PNB & VS. Mukul Sharma & Ors Page No.5 of 18
11. My findings on issues are as follows:
ISSUE NO. 1Whether the plaintiff is entitled for a sum of Rs 5,19,017/ as prayed for in prayer clause 21 (1) ? OPP
12. Testimony of PW1 shows that defendant no. 1 had taken housing loan of Rs. 10.0 lakh to purchase a Flat bearing No. 157, Ground Floor, SFS, Category III, Pocket I, Sector 4, Dwarka, Delhi under staff category. He also availed over draft facility under staff category for Rs. 4.50 lakhs vide application / documents Ex. PW1/B (Colly) & Ex. PW1/C (Colly), The loan/facility were sanctioned vide letters Ex. PW1/D & Ex. PW1/E. Defendant nos. 2 & 3 were the guarantors of the housing loan. They had signed the agreement of guarantee Ex.PW-1/F. PW1 has proved the loan documents Ex. PW1/F (Colly) and stated that all the documents were duly filled in, read over & explained to the defendants, who had signed the same after understating their implications. He also proved the loan accounts statement Ex. PW1/I (Colly) in respect of both the accounts, supported with a Certificate under Section 65-B of the Evidence Act.
Testimony of PW1 shows that the defendant no. 1 committed regular defaults and his accounts were declared as CS (Comm) No. 326/20 PNB & VS. Mukul Sharma & Ors Page No.6 of 18 NPA on 21.01.2016. He proved the NPA Certificate dated 16.03.2020 Ex. PW1/G and stated that the defendants were approached several times to repay the loan, a legal notice dated 08.01.2020 Ex. PW1/H (Colly) was sent to the defendants but they did not make the payments.
13. In the present case, there were two sanctions of loan i.e. housing loan and over draft facility vide Ex.PW-1/D and Ex.PW-1/E but in this suit for recovery, consolidated statement of accounts Ex. PW1/I (Colly) has been filed. PW1 has stated that defendant nos. 2 & 3 were guarantors in both the loans but when questioned, he could not give any satisfactory answer nor produced any document nor the deed of guarantee in respect of over draft facility. It is not in dispute that defendant no. 1 was the employee of the plaintiff and he did not mortgage the property / flat within 30 days of the execution of the documents despite giving an undertaking Ex. PW1/F (Colly). PW-1 has stated that though, the bank has recovered part of the amount from the gratuity and other funds of the plaintiff but they were not sufficient enough to realize the whole amount. Although, PW-1 has stated that the information about the defaults committed by defendant no. 1 was given to the guarantors but he failed to place any document in respect thereof. He denied that the liability of the guarantors comes to an end when the bank keeps the property documents of the borrower.
CS (Comm) No. 326/20 PNB & VS. Mukul Sharma & Ors Page No.7 of 18
14. DW1 is defendant no. 2, He retired as Chief Manager (Lead District Manager) from Punjab National Bank. He had stood guarantor for the housing loan taken by defendant no. 1. He has stated that he was guarantor to the housing loan only and not for the over draft facility. The plaintiff was totally negligent. It intentionally and deliberately did not mortgage the property of defendant no.1. He stated that as per the letter dated 05.02.2004 Ex. PW1/D, it was the duty of the plaintiff to obtain the title deed of the flat from the defendant no. 1 immediately on the execution of equitable mortgage and the liability of the surety was till the creation of equitable mortgage, which the plaintiff failed to do, though, it was incumbent upon the bank / plaintiff to get mortgaged the title deed within 30 days from the date of the execution of the deed. He deposed on the lines of written statement and stated that defendant no. 1 was dismissed from service in 2015. The bank had released the gratuity of Rs. 10.00 lakhs to defendant no. 1 in 2017 by transferring it in the account of defendant no. 1 in HDFC Bank. He stated that as per Circular No. A820 Ex. DW1/1 of the plaintiff's bank, for purchase of a ready built house / flat, deposit of title deed should be completed within 3 months of the date of the disbursement, which the plaintiff failed to observe.
He however admitted that if the borrower fails to make the payment of the loan amount, guarantor becomes liable but CS (Comm) No. 326/20 PNB & VS. Mukul Sharma & Ors Page No.8 of 18 stated that had the borrower discharged of his liability by creating equitable mortgage in favour of the plaintiff, the guarantors would have been discharged of their liability. He stated that he was never informed about the defaults committed by the borrower, which fact he came to know in 2016. He immediately approached the borrower who deposited Rs. 4.00 lakhs with the bank. Thereafter, he started making excuses. He admitted that he had signed the guarantee agreement after reading all the terms & conditions.
15. DW2 deposed on the lines of DW1. He also retired as Chief Manager from Punjab National Bank. He stated that the plaintiff never informed him of the defaults committed by the borrower. He stated that the Circular Ex. DW2/1 is retrospectively effective.
DW3 brought the details of PF statement and gratuity of defendant no. 1 Ex. DW3/A (Colly) and stated that there was no stay on release of gratuity / PF.
16. Ld. Counsel for the plaintiff vehemently argued that defendant no. 1 was the borrower and defendant nos. 2 & 3 were the guarantors. They are jointly & severally liable to pay the loan amount. In this case, the defendant no. 1 committed consecutive defaults in repayment of the loan amount for which, legal notice was sent to the defendants but the CS (Comm) No. 326/20 PNB & VS. Mukul Sharma & Ors Page No.9 of 18 defendants did not regularize the amount. Ld. Counsel referred the deed of guarantee including clause 3 at Page 90-91 and stated that the liability of the guarantors continues till the repayment of loans. Ld. Counsel stated that the Circular Ex. DW2/1 referred by the defendant is operative w.e.f. 01.04.2020.
17. Ld. Counsel for the defendants per contra argued that the plaintiff did not follow the Circulars / Guidelines issued from time to time nor the terms of the loan documents, which clearly provided that the borrower / defendant no.1 had to mortgage the property within 30 days by creating equitable mortgage in favour of the plaintiff, which he did not. Till date, the property has not been mortgaged. No explanation has been given by the plaintiff in this regard. Ld. Counsel referred the Circulars to contend that the liability of the guarantors remains till the creation of mortgage. Ld. Counsel stated that the defendants did not receive any notice from the plaintiff and there was total connivance of the bank officials with the defendant no. 1, who despite knowing that the defendant no. 1 had liability to repay the loan amount released the gratuity of Rs. 10.00 lakhs to defendant no. 1. Ld. Counsel stated that defendant nos. 2 & 3 were not the guarantors in respect of the over draft facility but the plaintiff filed the suit on the basis of consolidated statement of accounts in respect of the two loans.
CS (Comm) No. 326/20 PNB & VS. Mukul Sharma & Ors Page No.10 of 18
18. A perusal of record reveals that defendant no. 1 had availed housing loan facility and over draft facility from the plaintiff which were sanctioned vide letters dated 05.02.2004 & 20.03.2006. The plaintiff had opened two accounts i.e. a/c no. 112000LH00000084 in respect of housing loan facility & a/c no. 11200095000001364 in respect of overdraft facility. Defendant nos. 2 & 3 were the guarantors only in respect of the housing loan, which fact is also admitted by PW1. I failed to understand how the liability has been fastened on defendant nos. 2 & 3 in respect of the over draft facility availed by the defendant no. 1.
19. As per the statement of accounts Ex. PW1/I (Colly), the last payment made by defendant no. 1 of Rs. 4.00 lakhs was on 11.07.2017 leaving an outstanding balance of Rs. 2,30,262/- in respect of loan account no. 112000LH00000084 (housing loan). The last payment of Rs. 28,240/- in respect of loan account no. 11200095000001364 (overdraft facility loan) was made on 20.02.2017 by the defendant no. 1. This suit for recovery has been filed on 17.03.2020. Though there were two loans and two accounts were opened by the defendant no.1 with the plaintiff but the plaintiff in the present suit for recovery, has consolidated the amounts which is not permissible as per law. It appears that both the loans have been consolidated to bring the case for recovery in respect of second loan within the period CS (Comm) No. 326/20 PNB & VS. Mukul Sharma & Ors Page No.11 of 18 of limitation though barred by limitation. I am of the view that the recovery with respect to loan no. 11200095000001364 is barred by limitation being beyond the period of three years as provided under the Limitation Act, 1963.
20. Now, coming to the first loan i.e. the housing loan, the documents of the plaintiff show that the loan was taken in respect of a DDA built up flat. It was purchased by defendant no.1 from one Sh. H.S Sethi and it was a freehold flat. The defendant no.1 had entered into an agreement for sale and purchase with H.S Sethi on 14.01.2004. He, vide letter dated 07.02.2004 had requested the bank for releasing the loan amount stating that he has executed the documents on 07.02.2004. The Manager, vide letter dated 09.02.2004 had informed the Chief Manager that the defendant no.1 has executed all the documents as per H.O guidelines and all the terms and conditions of the sanction have been complied with including an undertaking from defendant no.1 to create equitable mortgage(EM) of the flat in favour of the bank. The sanction letter Ex.PW-1/D clearly provided that the equitable mortgage of the flat was to be created in favour of the bank and the sureties would remain good for the amount of the loan till the creation of equitable mortgage. Surprisingly, the plaintiff did not insist upon defendant no.1 to create equitable mortgage of the flat in its favour rather, it entertained the application for CS (Comm) No. 326/20 PNB & VS. Mukul Sharma & Ors Page No.12 of 18 overdraft facility from the defendant no.1 dated 24.11.2005 and 20.03.2006 and sanctioned the overdraft facility on 20.03.2006. There is not a single document to show that plaintiff had any time had asked defendant no.1 to create equitable mortgage of the flat in its favour. It is to note that the defendant no.1 in his letter dated 07.02.2004 had authorized the plaintiff to pay the amount of gratuity etc on his ceasing to be in the employment of the bank to be utilized towards payment of the outstanding, including the interest accruing due on the above loan. The record shows that the defendant no.1 had defaulted in payment of the installments against the aforesaid loan and his account was declared NPA on 21.01.2016. The document Ex.DW-3/A (colly) shows that the gratuity of Rs. 10.0 lakhs was released to the defendant no.1 on 19.06.2017 contrary to the undertaking given by defendant no.1 at the time of availing loan facility, which certificate was issued by the Chief Manager. It is strange that despite undertaking from the defendant no.1, the gratuity amount was released without realizing the dues against the loan facilities availed by the defendant no.1.
21. Loans and advances circular no. 96 dated 24.09.1998 issued by the Credit Administration Division (Policy Sanction), Head office, Punjab National Bank which is a public document of which the court can take judicial notice provided that acquisition of mortgage to bank should be completed within CS (Comm) No. 326/20 PNB & VS. Mukul Sharma & Ors Page No.13 of 18 three months. Extension of time limit may be granted by the sanctioning authority. Till such time, the loan is secured by creation of charge in the flat/house in favour of the bank, the loan will be secured by the balance of PF/gratuity payable to the borrowing employee and two sureties. The guarantee will be effective/operative only till the time proper equitable mortgage is created over the house/flat/apartment.
22. Admittedly, in the instant case, defendant no.2 and 3 were the guarantors for the housing loan facility availed by the defendant no.1 and the sanction letter Ex.PW-1/D clearly provided that equitable mortgage of the flat be created in favour of the bank and the sureties for the loan amount be taken till the creation of equitable mortgage in the account but the agreement of guarantee Ex.PW-1/F which has been signed by the guarantors/defendant no.2 and 3 provides that the guarantee shall be the continuing guarantee and shall remain operative in respect of the limits and may be enforced as such in the discretion of the bank. The guarantee shall not be considered as cancelled/affected even the said account may show on liability against the borrower or may even show credit in his favour and shall continue and remain in operation in respect of all subsequent transactions till the accounts are closed. It also provides that the guarantors consent to the bank making any variance without reference or notice to them that it may think fit CS (Comm) No. 326/20 PNB & VS. Mukul Sharma & Ors Page No.14 of 18 in terms of contract, including any charge in rate of interest charged to the account, with the borrower. The guarantor further consents to the bank accepting collateral security of any kind. Guarantor agrees that he shall not be discharged from his liability by the bank releasing the borrower or by any action/omission of the bank, the legal consequences of which may be to discharge the borrower etc. The guarantor further agrees that acceptance by the bank of any irregular payments or any amount short of the amount of agreed installment or on due date or thereafter by the borrower, shall not discharge the guarantor from his liability and such acceptance will not amount to or create any new or fresh contract.
23. It is true that the plaintiff within 30/90 days did not insist upon defendant no.1/borrower to create equitable mortgage of the flat in favour of the plaintiff in respect of the housing loan facility availed by the defendant no.1 but there is no record indicating that the defendant no.2 and 3, the guarantors had any time had insisted upon the defendant no.1 to create the mortgage of the flat in favour of the plaintiff. In this case, the defendant no.2 and 3 being guarantors had signed the agreement of guarantee and they are bound by the terms and conditions of the guarantee which clearly provides that the guarantee shall be the continuing guarantee and shall remain operative till the transactions are closed. In this case, as evident CS (Comm) No. 326/20 PNB & VS. Mukul Sharma & Ors Page No.15 of 18 from the statement of accounts, the defendant no.1 defaulted in payment of installments. His account was declared NPA. As on date of filing of suit, a sum of Rs. 2,30,262/- remained outstanding against the defendant no.1. It is true that there was gross negligence on the part of the plaintiff by not insisting upon the defendant no.1 to create equitable mortgage of the flat but on this count, the defendant no.2 and 3 cannot be allowed to draw any benefit nor they can be absolved of their liability to pay the amount in case, the borrower fails to pay the loan amount.
24. In this case, the notice was duly served upon the defendants but despite that they did not make the payments and therefore, they are jointly and severally liable with defendant no.1 to pay the amount due to the bank.
25. For the aforesaid discussions, I am of the view that the plaintiff is entitled for recovery of a sum of Rs. 2,30,262/- against all the defendants against the housing loan only and not against the overdraft facility. Plaintiff is however not entitled to recovery of a sum of Rs. 1,57,032/- against the overdraft facility being barred by limitation. Issue no.1 is accordingly decided.
CS (Comm) No. 326/20 PNB & VS. Mukul Sharma & Ors Page No.16 of 18 Issue no.2 Whether the plaintiff is entitled to interest, if so at what rate and from which period? OPP.
26. The plaintiff has claimed interest @ 12% per annum with monthly rests. The certificate of accrued interest shows that the loans were repayable in installments carrying interest @ 12% per annum. I am of the view that plaintiff is entitled to interest @ 12% per annum on the amount of Rs. 2,30,262/- w.e.f. 20.02.2017 till its realization.
Issue no.3- Relief
27. In view of the findings on issue no.1 and 2, suit of the plaintiff is decreed in favour of the plaintiff and against the defendants for a sum of Rs. 2,30,262/- with interest @12% per annum w.e.f. 20.02.2017 till its realization with costs. All the defendants shall be jointly and severally liable to pay the amount.
28. Decree sheet be prepared accordingly.
29. Copy of the order/judgment be sent to Chief General Manager, Punjab National Bank, Northern Region for holding departmental enquiry/ initiating disciplinary action against the CS (Comm) No. 326/20 PNB & VS. Mukul Sharma & Ors Page No.17 of 18 delinquent bank officials.
30. File be consigned to record room.
Announced in open court today i.e. 16.08.2022 (Sanjiv Jain) District Judge (Commercial- 03) Patiala House Courts, New Delhi CS (Comm) No. 326/20 PNB & VS. Mukul Sharma & Ors Page No.18 of 18