Bangalore District Court
Small Industries Development vs M/S.Venugopal & Co on 2 March, 2015
IN THE COURT OF THE XII ADDL. CITY CIVIL AND SESSIONS
JUDGE AT BANGALORE
PRESENT: SRI.BHAIRAPPA SHIVALING NAIK B.Com.,LL.B.(Spl),
XII ADDL.CITY CIVIL & SESSIONS JUDGE
(CCH.No.27), BANGALORE
DATED THIS THE 2ND DAY OF MARCH 2015
O.S.No.1751/2011
PLAINTIFF:- Small Industries Development
Bank of India,
'Khanija Bhavan'
V floor, East Wing,
No.49, Race Course Road,
Bengaluru -560001,
Represented by its
General Manager and
authorised Person
Sri.Sudhir Dinkar Burde,
s/o.Dinkar B.Burde,
aged about 51 years.
(By Sri.Prashant N Hegde
Advocate)
-VS-
DEFENDANTS:- 1. M/s.Venugopal & Co.,
At 131/8, 9th Main,
Muniganga Kalyana Mantap
Building, 60 feet Road,
Manjunatha Nagar,
Bengaluru -560010,
Represented by its
2 O.S.No.1751/2011
Proprietor
Smt.Jagadishwari.D
2. Smt.Jagadishwari.D
D/o. of Sri.A.Muniswamy
Aged about 46 years,
Residing at No.K-9
3rd Main, Laxminarayanapuram,
Bengaluru -560021.
3. State Bank of Mysore,
West of Chord Branch,
Bengaluru -560008,
Represented by its Manager
(Deft.No.1& 2:Exparte
Deft.No.3:Sri.T.S.Mahabaleswar
Date of Institution of the suit : 05/03/2011
Nature of the suit : Recovery of money
Date of commencement of
recording of the evidence : 25/11/2013
Date on which the Judgment was
pronounced : 02 /03/2015
Total Duration Years Months Days
: 03 11 25
(BHAIRAPPA SHIVALING NAIK)
XII ADDL. CC AND SS JUDGE
BANGALORE
3 O.S.No.1751/2011
J U D G E M E N T
This suit is filed by the plaintiff for recovery of money against the defendants.
2. The plaintiff is a Corporation established under the Small Industries Development Bank of India Act,1989. As per Regulation 10 & 11, the General Manager of the applicant bank is authorised to sign, verify and institute this suit. The 2nd defendant is the proprietor of M/s.Venugopal & Co. i.e., the first defendant. The plaintiff Bank sanctioned Working capital term loan of Rs.10,00,000/- to the 1st defendant for the purpose of installation/construction and fabrication of petrol tanks and issued Letter of Intent datd.5.12.2005 to the defendant. The plaintiff has upon the request of the borrower covered the loan under the Credit Guarantee Fund Trust for Small Industries (CGTSI) and has issued modification to letter of Intent dated.15.12.2005. The 1st defendant accepted the terms and conditions of the Letter of Intent and the modification to Letter of Intent and availed Working capital Term loan as and when needed and while availing the said facilities, the 2nd defendant proprietor of 1st defendant has executed Loan Agreement, Deed of Hypothecation, 4 O.S.No.1751/2011 Financial assistance to M/s.Venugopal & Co., for overrun, Financial Assistance to M/s.Venugopal & Co., undertaking for non-disposal of share and affidavit of 2nd defendant.
3. The 2nd defendant has guaranteed the repayment of loan by executing the Deed of Guarantee on 15.12.2005 in favour of the plaintiff Bank. The 2nd defendant is liable to pay Rs.10,00,000/- together with further interest, liquidated damages, costs, charges, expenses and all other moneys payable by the 1st defendant to the plaintiff Bank. The 1st defendant by executing the Deed of Hypothecation dated.20.12.2005 hypothecated the materials and other goods and other current assets in favour of the plaintiff Bank and hypothecated major items of the materials and other goods etc., more fully described in the schedule 'A' and mortgaged along with paripassu charge with State Bank of Mysore i.e., defendant No.3. The Letter of Authority dated.19.12.2005 for paripassu charge issued by State Bank of Mysore West of Chord Branch and the Letter ceding paripassu charge dated.20.12.2005 issued by State Bank of Mysore, West of Chord Branch .
5 O.S.No.1751/2011
4. Defendants 1 and 2 agreed to pay interest at 9.50% p.a. on the principal amount of Term loan outstanding and penal interest at 2% over and above the applicable interest for defaults in Principal, interest and other monies payable under the loan Agreement. The 1st defendant did not maintain Working capital Term loan as per the agreed terms and Term Loan has become overdue. The plaintiff issued legal notice dated.26.10.2010 by RPAD recalling working capital Term loan and advised the 1st defendant to deposit the outstanding dues within 30 days from the date of receipt of notice. The 1st defendant received the recall notice but did not choose to comply the demand made therein or replied the same. The plaintiff has invoked the personal mg guarantee of the 2nd defendant by issuing separate notice of Invocation of Guarantee dated.29.11.2010 in respect of Working Capital Term Loan to the defendants. The 2nd defendant did not come forward inspite of due service of that notice to settle the outstanding dues. The plaintiff further submitted that due to typographical error, the rate of interest in the recall notice dated.26.10.2010 is mentioned as 9.5% instead of 11.50% which is the contractual rate of interest as per the loan documents executed by 6 O.S.No.1751/2011 the borrower in favour of SIDBI. Hence the plaintiff is constrained to file the suit for recovery of Rs.3,09,029/- including interest upto 03.03.2011 and other charges together with future interest thereon at the rate of 11.5% p.a. compounded monthly and also to pass a charge decree over the schedule property and order sale of the schedule property with direction to adjust the net sale proceeds (after defraying here from the expenses of such sale) towards cost, interest, principal and other monies payable by the defendant to the plaintiff along with costs of the suit.
5. Inspite of repeated issue of suit summons and due publication of citation, defendants 1 and 2 have remained absent and placed exparte. The defendant No.3 has appeared through its standing Counsel and resisted the claim of the plaintiff by filing the written statement. Defendant No.3 has submitted that the suit is not maintainable both in law and facts and is liable to be dismissed in limine. The defendant No.3 has admitted the loan of Rs.10,00,000/- availed by the 1st defendant by executing documents and the 2nd defendant stood as guarantor for loan availed by the 1st defendant. The 2nd defendant is the proprietor of M/s.Venugopal & Company & 7 O.S.No.1751/2011 others. The 1st defendant hypothecated the materials and goods in favour of the plaintiff Bank by executing Deed of Hypothecation. Further the materials and other goods mortgaged in favour of the plaintiff Bank and hypothecated goods etc., along with the following documents:-
a. Sanction Communication letter b. Memorandum of Term Loan Agreement for housing loan c. Confirmation of deposit of title deeds d. Sanction communication letter e. Term loan Agreement
6. The defendant No.3 has got paripassu Agreement and the said hypothecated goods are mortgaged along with paripassu charge with the defendant No.3 bank and the same is informed to the plaintiff Bank vide letter of Authority dated.19.12.2005 for paripassu charge.
7. Defendant No.3 further submitted that the 2nd defendant has availed loan for construction and mortgaged the property bearing No.1541/C/5, 3rd cross, Mariyappana Palya, Bengaluru 560010 being the proprietor of 1st defendant company. The 3rd defendant reserves its right to recover the loan availed by the defendant No.2. If the 2nd defendant failed to repay the loan, this 8 O.S.No.1751/2011 defendant has every right to put the mortgaged property to sale and after clearing the loan account with defendant No.3, the plaintiff Bank can adjust the remaining sale proceeds to its loan account. The defendant No.3 has no comments with regard to the averments made in para- to 18 of the plaint. Defendant No.3 having charge over the schedule property is having every right to recover its dues from the defendants 1 and 2 along with plaintiff Bank. There is no relief sought against this defendant and the suit against defendant No.3 be dismissed as there is no relief is sought against defendant No.3.
8. Defendant No.3 further submitted that the defendants 1 and 2 have availed the loan for the purpose of construction of house and mortgaged the said property and executed necessary documents in favour of defendant No.3. Defendants 1 and 2 have availed the following loans:
a. Housing loan Account No.54002364884 of Rs.7,52,468/-
b. Housing loan account No.54002364895 of Rs.10,19,394/-
c. All purpose mortgage loan Account No.64041466568 of Rs.11,41,960/- 9 O.S.No.1751/2011
9. After availing the aforesaid loan facility, defendants 1 and 2 failed to clear the dues. Since 13.9.2011, the defendants are due in a sum of Rs.46,36,132/- which pertains to the year 2003. The defendants 1 and 2 have got 1st charge and hence the dues of the 3rd defendant is to be cleared first and remaining to be adjusted to the plaintiff. Therefore, defendant No.3 has prayed that the 3rd defendant is also entitled to recover the dues from 1st and 2nd defendant from 30.9.2011 a sum of Rs.46,36,132/- in terms of paripassu in the interest of justice and equity.
10. On the basis of the above pleadings, the following Issues have been formulated:-
ISSUES
1. Whether the plaintiff proves that the defendant Nos. 1 and 2 are liable to pay sum of Rs.3,09,029/- together with future interest at the rate of 11.5 % per annum from the date of suit to the date of realization to the plaintiff?
2. Whether the plaintiff is entitled to create charge over the schedule property?10 O.S.No.1751/2011
3. Whether the defendant No.3 bank is having charge over the schedule property to recover its dues from the defendant Nos. 1 and 2 along with plaintiff-bank?
4. What Order or Decree?
11. The plaintiff got examined its Deputy General Manager as P.W.1 and adduced documentary evidence from Ex.P1 to Ex.P19.
Though defendant No.3 has appeared and submitted written statement, yet filed to participate during trial. Defendant No.3 inspite of sufficient opportunity did not care either to cross-examine P.W.1 or to adduce any evidence in support of its claim. I have heard the counsel for both the parties. Perused the evidence on record.
12. My finding on the above Issues are :-
Issue No.1: In the Affirmative
Issue No. 2: In the Affirmative
Issue No.3: In the Negative
Issue No.4: As per final order
for the following :-
R E A S O N S
13. Issue Nos.1 & 2 :- As these issues are inter related to each other, evidence is to be appreciated in common and to avoid repetition, they are taken up together.
11 O.S.No.1751/2011
14. P.W.1 has reiterated the averments made in the plaint in the course of his examination-in-chief. As noted supra, the oral evidence of P.W.1 coupled with the documentary evidence on record adduced by the plaintiff is remained unchallenged. The 2nd defendant being proprietor of 1st defendant has submitted an application for financial assistance. The plaintiff issued Letter of Intent as per Ex.P1 and the same has been accepted by the 2nd defendant as proprietor. The 2nd defendant has accepted Modification to Letter of Intent dated.15.2.2005 issued by the Deputy General Manager of plaintiff as per Ex.P2. Besides, the 2nd defendant has executed Loan Agreement as per Ex.P3 thereby the defendants 1 and 2 agreed to pay 9.50% p.a. on the principal amount of the loan outstanding from time to time at monthly rests on the 1st day of each month provided, that having regard to the rates of interest applicable to the term loans granted by All India Financial Institutions and scheduled Banks, SIDBI may at any time during the currency of the loan, call upon the borrower to pay interest on the balance outstanding and other monies payable in respect of the loan at such higher rate as may be fixed by the SIDBI and intimated to the Borrower. Further all interest on the 12 O.S.No.1751/2011 loan and all other monies accruing due under the Agreement shall in case same be not paid on the respective due dates shall become payable upon the footing of compound interest with quarterly rests as provided in the Agreement. The 2nd defendant as a proprietor of 1st defendant has executed Deed of Hypothecation as per Ex.P4 on 20.12.2005 and thereby hypothecated current assets including stock of raw materials, semi finished goods, work in progress, consumables, stores, spares tools, accessories, finished goods, receivables/book debs and such other movables as described in the schedule annexed to the plaint. The 2nd defendant has executed financial assistance to M/s. Venugopal & Co. undertaking for Overrundated.15.12.2005 as per Ex.P5. On the same date, the 2nd defendant has executed Financial Assistance to M/s. Venugopal & Co. undertaking for Non-disposal of share holdings as per Ex.P6 and also sworn to an affidavit at Ex.P7 and also submitted Financial Assistance to M/s. Venugopal & Co. Guarantee in favour of SIDBI as per Ex.P8. Besides, the 2nd defendant has executed Deed of guarantee at Ex.P9. As per Agreement and Deed of guarantee executed by the 2nd defendant, defendants 1 and 2 are 13 O.S.No.1751/2011 bound by terms and conditions stipulated therein so far the loan transaction in question is concerned.
15. The defendant No.3 had sent Letter of Authority on 19.12.2005 as per Ex.P10 and also submitted financial assistance to M/s. Venugopal & Co. ceding Paripassu charge. Accordingly the defendant No.3 acting for its and acting on behalf of the plaintiff would execute Memorandum of paripassu Agreement provided, interalia, that security created/ to be created by the borrower in favour of defendant No.3 and plaintiff shall rank parri pasu charge on the security without any preference or priority of one over others and including usual provisions relating to insurance, current assets, application to realisation and proceeds of sales etc., in such forms and in such manner as may be mutually agreed upon. Defendant No.3 authorised to make a mention of pari passu charge in favour of plaintiff in the form of particulars of charge that may be filed by the plaintiff/by the borrower with Registrar of Companies pursuant tot provisions of companies Act 1956.
16. The plaintiff due to default on the part of defendants 1 and 2 had issued legal notice dated.26.10.2010 as per Ex.P12. As 14 O.S.No.1751/2011 averred in the plaint, the plaintiff demanded interest on the balance amount at the rate of 9.5% p.a. with effect from 10.6.2010 as mentioned in para-10 of the recall notice. The plaintiff has rightly sought for correction of the said mistake in mentioning the rate of interest as 9.5% p.a. instead of 11.5% p.a. as claimed in the suit. The said notice was served upon the defendant as per postal acknowledgment at Ex.P13. The 2nd defendant was also served with notice for invocation dated.29.11.2010 as per Ex.P14. The said notice also served upon both the defendants as it is evident from Ex.P15 to Ex.P17- postal acknowledgments. Thereafter the plaintiff got issued Financial assistance under Defendants Scheme-Payment of dues- Modification to letter issued on 26.10.2010 as per Ex.P18. The same was also served upon the defendants inspite of which, the defendant No.1 did not care either to comply with the legal notice or demand made by the plaintiff or replied to the plaintiff within reasonable time. The Statement of Accounts at Ex.P19 discloses that a sums of Rs.3,01,222.09ps was due from the defendants 1 and 2 as on 10.9.2010. The plaintiff Bank after adding the interest upto date and other charges, has claimed a sum of Rs.3,09,029/- as due from the 15 O.S.No.1751/2011 defendants 1 and 2 as on the date of suit. As per the terms of Agreement, due to default on the part of the defendants, the plaintiff is entitled to claim future interest on the said sum as claimed against the defendants. The plaintiff is also entitled to create charge over the schedule property in pursuance to the Hypothecation Agreement and Deed of guarantee executed by the 2nd defendant. Hence without much discussion, I hold that the defendants 1 and 2 are liable to pay a sum of Rs.3,09,029/- together with interest at 11% p.a. from the date of suit, to the date of realisation to the plaintiff Bank. Hence I answer both the issues in the Affirmative.
17. Issue No.3:- The defendant No.3 -Bank has duly admitted the loan availed by the 1st and 2nd defendant from the plaintiff Bank and the amount claimed by plaintiff with future interest as against the defendants. Defendant No.3 has also admitted that defendants 1 and 2 have hypothecated the schedule properties and the plaintiff has got right to create charge over the said hypothecated/ mortgaged properties. The 3rd defendant has sent Letter of Authority and undertaking to execute Memorandum of 16 O.S.No.1751/2011 Paripassu subject to conditions as stipulated in Ex.P11 on 20.12.2005. Accordingly the security created/ to be created by the borrower in favour of defendant- 3 and plaintiff shall rank pari passu charge on the security without any preference or priority of one over otheres. None of the parties has executed Memorandum of Paripassu Agreement so as to take into consideration. As pleaded by the 3rd defendant, the defendants 1 and 2 have availed loan from defendant No.3 for the purpose of construction of house and mortgaged the house bearing No.1541/C/5 and executed various documents in favour of defendant No.3. The said mortgage of immovable property is nothing to do with the schedule properties as per the terms of Deed of Hypothecation. The defendants 1 and 2 are bound to clear the loan availed by them from defendant No.3. On the other hand, defendant No.3 has got every right to recover the entire amount due from the defendants 1 and 2 by sale of mortgaged immovable property but the defendant No.3 cannot create charge over the schedule property to recover its dues from the defendants 1 and 2 along with plaintiff Bank. Looking to the actual amount due to plaintiff as well as defendant No.3 from the defendants 1 and 2, the plaintiff has got 17 O.S.No.1751/2011 every right to create charge over the schedule property. Hence without much discussion, I answer Issue No.3 in the Negative.
18. Issue No.4:- In view of my findings on Issue Nos.1 to 3 and reasons stated therein, in the result, I proceed to pass the following:-
O R D E R The suit of the Plaintiff Bank is decreed against the defendants No.1 and 2 with costs as under:-
The defendants 1 and 2 are jointly and severally liable to pay a sum of Rs.3,09,029/- (Rupees Three Lakhs Nine Thousand Twenty Nine Only) to plaintiff - Bank with future interest thereon at the rate of 11.5% p.a. from the date of suit to the date of complete realisation of the entire amount to the plaintiff Bank within three months from the date of this order.
Further the plaintiff shall create charge over the schedule property and to sell the schedule property with a direction to adjust the net sale proceeds and (after defraying there from the expense of such sale) towards cost, interest, principal and other monies to be payable by the defendant to the plaintiff and balance if any due, shall be recovered from the person and other properties of the defendants No.1 and 2. 18 O.S.No.1751/2011
The suit of the plaintiff as against defendant No.3 is dismissed.
Draw decree accordingly.
(Dictated to Judgment writer, transcribed by her, thereof corrected by me and then pronounced by me in the open court on this the 2nd day of March 2015) (BHAIRAPPA SHIVALING NAIK) XII Addl. City Civil & Sessions Judge, Bangalore.
A N N E X U R E I. List of witnesses examined on behalf of:
(a) Plaintiff's side :
P.W.1 - Mr. T.H.R.Samad
(b) Defendants' side : N I L II. List of documents exhibited on behalf of :
(a) Plaintiff's side :
Ex.P1: Letter of intent.
Ex.P2: Modification to letter of intent.
Ex.P3: Loan agreement.
Ex.P4: Deed of hypothecation.
Ex.P5: Financial assistance to M/s. Venugapal
& Co., undertaking for overrun.
Ex.P6: Financial assistance to M/s. Venugapal
& Co., undertaking for non disposal of
share holdings.
Ex.P7: Affidavit of 2nd defendant.
Ex.P8: Letter of guarantee.
Ex.P9: Deed of guarantee.
19 O.S.No.1751/2011
Ex.P10: Letter of authority.
Ex.P11: Letter dt.20.12.2005.
Ex.P12: Recall notice.
Ex.P13: Postal acknowledgement.
Ex.P14: Notice of invocation.
Ex.P15-17: Three postal acknowledgements.
Ex.P18: Copy of modification to recall notice.
Ex.P19: Account extract.
(b) Defendants' side : NIL
(BHAIRAPPA SHIVALING NAIK)
XII Addl.City Civil & Sessions Judge,
Bangalore
20 O.S.No.1751/2011
(Judgment pronounced in open court)
The suit of the Plaintiff Bank
is decreed against the defendants
No.1 and 2 with costs as under:-
The defendants 1 and 2 are
jointly and severally liable to pay a
sum of Rs.3,09,029/- (Rupees Three
Lakhs Nine Thousand Twenty Nine
Only) to plaintiff - Bank with future
interest thereon at the rate of 11.5%
p.a. from the date of suit to the date
of complete realisation of the entire
amount to the plaintiff Bank within
three months from the date of this
order.
Further the plaintiff shall
create charge over the schedule
property and to sell the schedule
property with a direction to adjust
the net sale proceeds and (after
defraying there from the expense of
such sale) towards cost, interest,
principal and other monies to be
payable by the defendant to the
plaintiff and balance if any due, shall
be recovered from the person and
other properties of the defendants
No.1 and 2.
The suit of the plaintiff as
against defendant No.3 is dismissed.
Draw decree accordingly.
(vide Judgment passed)
XII ACCJ;Bangalore