Delhi District Court
State Bank Of India vs M/S. Jal Shakti Pumping Sets on 5 July, 2010
Page numbers
IN THE COURT OF SH. SIDHARTH SHARMA: ASCJ
(NORTHII) DELHI.
SUIT NO:32/05/76.
State Bank of India, a Corporation constituted
under the State Bank of India, Act No.XXIII of 1955
having its Central office at Bombay and its local Head
Office at: 11, Parliament Street, New Delhi and
Branch office South Extension Part II, New Delhi.
..........Plaintiff
Versus
1. M/s. Jal Shakti Pumping Sets,
6, Western Avenue, Maharani Bagh, New Delhi.
2. Mrs. Ratna Bagai,
Sole Proprietor:
M/s. Jal Shakti Pumping Sets,
C/o Sh. C.D. Malani,
25, I, Main Avenue, Santacruz Coast,
Bombay54.
3. Sh. Prem Kishan,
2A, Kautilya Marg, New Delhi.
4. Group Capt. O.P. Taneja,
D348, Defence Colony, New Delhi.
..............Defendants
Suit No.32/05/76 Page numbers/Statistics
Page numbers
Date of Institution of the suit : 16.08.1976
Date on which order was reserved : 03.07.2010
Date of decision : 03.07.2010
SUIT FOR RECOVERY.
:JUDGMENT:
1. Plaintiff State Bank of India has filed the present suit for recovery of Rs.1,44,649.60/ along with pendent lite and future interest. The said suit was filed before the Hon'ble High Court of Delhi in the year 1976. The brief facts of the case are that plaintiff bank is a statutory corporation constituted under the State Bank of India Act, 1955. The suit had been filed by its duly authorized representative namely Sh. H.C. Kapoor who was the branch manager of the Parliament Street Branch, New Delhi at the relevant time and had signed & verified the plaint. The defendant no.1 is a sole proprietorship concern at Delhi and was carrying on the business of manufacturing pumping sets. The defendant no.2 is stated to be the sole proprietor of defendant no.1. It was further averred in the plaint that by notification published in Government of India Suit No.32/05/76 Page numbers/Statistics Page numbers Gazette Part II Section 3(11) by virtue of Section 5 of the Banking Regulations Act, the Krishnaram Baldeo Bank Limited was amalgamated with the State Bank of India and as per the terms of the notification, the State Bank of India had taken over all the rights, title and interests as well as liabilities of the said Krishnaram Baldeo Bank Limited and therefore South Extension Branch of Krishnaram Baldeo Bank Limited became the branch of State Bank of India with effect from the date of notification. It was averred in the plaint that in the year 1973 defendant no.1 & 2 approached the Krishnaram Baldeo Bank Limited, South Extension Part II Branch for cash credit loan facilities on the basis of defendant no.1 & 2 agreeing to pay the said bank interests on the amount so advanced @ 6% pa over Reserve Bank of India rate with a minimum to 13% pa. It was further agreed that bank shall charge and pledge/hypothecate with them the stock consisting of finished goods products. The said Krishnaram Baldeo Bank Limited accepted the proposal and granted the cash credit limit of Rs.1,00,000/ to defendant no.2 as the sole proprietor of defendant no.1. The defendants executed Letter of Hypothecation, Loan Suit No.32/05/76 Page numbers/Statistics Page numbers Agreement dated 18.8.1973 for Rs.1,00,000/ in favour of Krishnaram Baldeo Bank Limited. The defendant no.1 & 2 also executed and delivered Demand Promissory Note of Rs.2,00,000/ dated 18.8.1973 in favour of the said bank. They also furnished guarantee of defendant no.3 & 4 who executed the Guarantee Agreement dated 18.8.1973 in favour of Krishnaram Baldeo Bank Limited.
2. The defendant no.1 & 2 availed all the aforesaid loan facilities and on various occasions kept on drawing the said accounts in terms with the agreement. As per the statement of accounts (Annexure A) forming part of the plaint, Rs.1,44,649.60/ were outstanding and due from the defendants inclusive of interests up to 30.6.1976. Requests were made to all the defendants to make the payment but they failed to reimburse the said account. A notice dated 5.6.1976 was sent by registered AD through the Advocate of the plaintiff bank but the defendants failed to make the payment and hence, the present suit had been filed for recovery of Rs.1,44,649.60/ along with pendent lite & future interest. A further prayer was made to Suit No.32/05/76 Page numbers/Statistics Page numbers sell the hypothecated goods to recover the outstanding amount.
3. Written statement was filed by defendant no.1 & 2 jointly wherein preliminary objection was taken by defendant no.2 that she is only a benami sole proprietor and in actual her husband Sh. J.C. Bagai is the real sole proprietor of defendant no.1. She further denied the allegation of the plaint and showed complete ignorance about the bank transaction and averred that she never engaged herself in the business of defendant no.1 and therefore she is not liable to pay any amount to the bank. She tried to shift the responsibility of the payment on her husband who is not a party in this case. She stated that she signed some blank papers brought by her husband and therefore is not liable to make any payment.
4. Written statement was filed by defendant no.3 wherein he denied that he had signed the guarantee bond but he took the defence that he immediately on the next day revoked the said guarantee and therefore he is not liable to make any payment to the plaintiff bank. He also took the preliminary objection that there is no privity of Suit No.32/05/76 Page numbers/Statistics Page numbers contract between the bank and himself and therefore denied the liability to make the payment.
5. A separate written statement was also filed by defendant no.4 taking almost all the same plea taken by the defendant no.3 and stated that he had revoked the guarantee deed and was orally assured by the bank manager that the said revocation shall be duly finalized from the head office. He averred that as he had cancelled the guarantee deed and is therefore not liable to make any payment under the contract.
6. Replication was filed by the plaintiff bank wherein all the contents of the written statements were denied. In reply to the written statement of defendant no.1 & 2, plaintiff bank averred that they have no concern with the husband of defendant no.2 and they denied that the husband of defendant no.2 was benami sole proprietor. It was further averred that they had entered into a contract with the defendant no.1 & 2 and denied the contents of the written statement. In respect of defendant no.3 & 4, the plaintiff Suit No.32/05/76 Page numbers/Statistics Page numbers bank averred in their replication that defendant no.3 & 4 cannot unilaterally revoked the guarantee deed and absolve themselves from the liability. It was further averred that the guarantee was an unconditional and a continuing guarantee and until the outstanding dues were cleared, there could not be any unilateral revocation of the said guarantee. They denied all the contents of the written statement wherein defendant no.3 & 4 claimed that they are not liable to make any payment.
7. An application under Order 40 Rule 1 CPC was filed by the plaintiff praying for appointment of receiver and direction to the receiver to prepare the inventory of the articles pledged with the bank lying in the godown of plaintiff. The said receiver was appointed who submitted his report to the court where after the court auction took place. Counsel for the plaintiff made a statement before the Hon'ble High Court of Delhi that he had received the highest bid of Rs.6700/ and in view of the same, the pledged goods were sold for the said amount.
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8. On the pleadings of the parties following issues were framed on 27.9.1978:
i) Whether the plaint has been signed and verified and suit instituted by a duly authorized person? OPP.
ii) Whether defendant 4 is not liable as the said defendant orally withdrew the guarantee? OPD4.
iii) Whether the various loans were advanced to defendants 1 and 2 without taking proper hypothecation of the goods? If so what is its effect? OPD4.
iv) Whether the suit as framed, is not maintainable? OPD4.
v) Whether the loans are the result of collusion between the bank and defendants 1 and 2? OPD4.
vi) Whether the liability of defendant 3 as surety stood terminated on serving notice in terms of letter dated October 15, 1973 by him on the plaintiff bank? OPD3.
vii) Whether there is any privity of contract between the plaintiff and defendant 3? OPD3.
viii) To what amount is plaintiff entitled and against which of the defendants? OPP.
ix) Relief.
9. Plaintiff examined PW 1 Sh. H.C. Kapoor who had filed the plaint. Plaintiff also examined PW 2 Sh. P.P. Srivastava. Defendants 1 & 2 examined Sh. J.C. Bagai who is husband of defendant no.2 Mrs. Ratna Bagai. Defendant no.3 examined himself as DW 3 Suit No.32/05/76 Page numbers/Statistics Page numbers and defendant no.4 examined himself as DW 4.
10. During trial when the matter was fixed up for final arguments, the suit was transferred to the District Courts from the Hon'ble High Court of Delhi on the ground of lack of pecuniary jurisdiction. It is also seen that defendant no.3 expirted after recording his evidence. No steps were taken for substitution of his legal representatives under Order XXII of the CPC and hence, the suit against defendant no.3 stood abated.
11. I have heard the learned counsel for plaintiff. No one has appeared on behalf of defendants inspite of number of opportunities and service of court notices to the defendants. Hence, I am proceeding to decide the case on the basis of evidence recorded in this case and the documents proved on record and my issuewise finding is as under:
ISSUE NO.1 Suit No.32/05/76 Page numbers/Statistics Page numbers
12.The burden to prove the issue was upon the plaintiff. PW 1 has proved Ex PW 1/1 which is the Authority Letter under the Regulation 76 & 77 issued under the S.B.I. Act Gazette Notification and the powers of the branch manager are notified in the official gazette. The defendants have not proved in the cross examination of this witness or anything in evidence to suggest that the person who had filed the present suit was not competent to file and verify the suit. Hence, in my opinion the suit has been filed by a duly authorized person. The issue is decided in favour of plaintiff and against the defendants.
ISSUE NO.2
13. The burden to prove the issue was upon the defendant no.4. Defendant no.4 had taken a defence that he is not liable to make any payment as he had orally withdrawn the guarantee. However defendant no.4 has not brought any evidence on record to show that he had the powers or understanding with the bank to orally withdraw the written guarantee deed Ex P7 which he had signed and was unconditional and continuing guarantee. In any case, Suit No.32/05/76 Page numbers/Statistics Page numbers defendant no.4 has not been able to show anything that the plaintiff bank or its predecessor Krishnaram Baldeo Bank Limited had agreed to revocation of the bank guarantee and therefore in my opinion defendant no.4 cannot be permitted to orally revoke a bank guarantee which admittedly had been signed by him. In view of the same, the issue is decided in favour of the plaintiff bank and against defendant no.4.
ISSUE NO.3
14.The burden to prove this issue was upon the defendant no.4. The defendant no.4 could not lead any evidence to show that various loans were advanced to defendant no.1 & 2 without taking proper hypothecation of the goods. On the contrary, plaintiff bank has been able to show that the pledged goods were kept in its custody as the locks & keys of the factory were in control of the plaintiff bank. Defendant no.4 could not lead any evidence to support his contention that proper hypothecation was not taken specially in view of the fact that the hypothecated goods were sold by the court Suit No.32/05/76 Page numbers/Statistics Page numbers receiver which was under the lock & key of the plaintiff bank and plaintiff bank took all the precautions to secure the hypothecated goods. The issue is accordingly decided in favour of the plaintiff bank and against defendant no.4.
ISSUE NO.4
15. The burden to prove the issue was upon the defendant no.4. Defendant no.4 had taken a defence that the suit as framed was not maintainable. However, he could not show anything as to how the suit was not maintainable against the principal borrower and as well as defendant no.4 in view of the various documents executed by defendant no.1 & 2 and in view of the guarantee agreement signed by defendant no.4 in favour of the plaintiff bank or its predecessor. In view of the same, the issue is decided in favour of the plaintiff and against the defendant no.4. ISSUE NO.5
16. The burden to prove the issue was upon the defendant no.4 that the loans and advances are a result of collusion between the bank Suit No.32/05/76 Page numbers/Statistics Page numbers officials and defendant no.1 & 2. Again defendant no.4 could not bring anything on record through his evidence or documents to show that there was a collusion between the bank officials and defendant no.1 & 2. Infact officials of the plaintiff bank through various correspondence with defendant no.1 & 2 wanted the outstanding to be cleared by the defendants and there is not an iota of evidence proved by defendant no.4 showing the collusion of bank officials with defendant no.1 & 2 and therefore the issue is decided in favour of the plaintiff bank and against defendant no.4.
ISSUE NO.6
17. The suit against defendant no.3 already stands abated. The plaintiff bank took no steps to implead the legal representatives of defendant no.3 and therefore the decision on Issue no.6 is irrelevant as to whether the liability of defendant no.3 stood terminated on service of notice in terms of letter dated October 15, 1973 issued by him on the plaintiff bank. In any case, there cannot be a unilateral revocation of the guarantee deed and any such revocation can have effect only with the consent and approval of the plaintiff bank which have not been proved on record. The issue is decided Suit No.32/05/76 Page numbers/Statistics Page numbers accordingly.
ISSUE NO.7
18. The burden to prove the issue was upon the defendant no.3 who already expired during the course of trial. However there is a privity of contract between the plaintiff and defendant no.3 as the plaintiff clearly proved the amalgamation as per the approval of Government of India and had also proved the notification published in Government of India Gazette Part II Section 3(11) by virtue of Section 5 of the Banking Regulations Act, whereby, the State Bank of India took over all the assets and liabilities of the erstwhile Krishnaram Baldeo Bank Limited. The issue is decided in favour of the plaintiff bank and against defendant no.3. ISSUE NO.8
19. The plaintiff bank proved various documents including statement of accounts Ex PW 1/2. The plaintiff also proved the loan transaction through the evidence of witnesses PW 1 & PW 2 who are the bank witnesses. PW 1 is the witness of State Bank of India Suit No.32/05/76 Page numbers/Statistics Page numbers who proved his authorization vide Ex PW 1/1. PW 2 who was working as accountant with Krishnaram Baldeo Bank Limited, South Extension Branch at the relevant time when the defendant no.1 & 2 took the loan. He proved that documents were signed by defendant no.2, 3 & 4 in his presence. He proved the letter of continuity dated 18.8.1973 Ex P3 signed by defendant no.2. He proved the original declaration of sole proprietor dated 18.8.1973 by defendant no.2 Mrs. Ratna Bagai which is Ex P4. He also proved the original letter of hypothecation Ex P5 dated 18.8.1973. He proved another document "Pledge of goods to secure demand cash credit" dated 18.8.1973 which is Ex P6. He proved letter of Guarantee signed by Group Capt. O.P. Taneja as Ex P7. He proved the second letter of guarantee signed by defendant no.3 Sh. Prem Kishan as Ex P8. He proved the original agreement for discounting bills signed by defendant no.2 as Ex. P9. He proved the application form for small scale industries block loan facility signed by defendant no.2 which is Ex P10. He proved the letter sent by defendant no.2 to State Bank of India as Ex P11. He proved another letter Ex P12 sent by defendant no.2 which was Suit No.32/05/76 Page numbers/Statistics Page numbers addressed to the plaintiff bank requesting for continuing of the facilities by the plaintiff bank. He also proved that the pledged goods were taken over by the plaintiff and inventory was prepared of such goods.
20.From the evidence brought on record by the plaintiff and the documents proved on record, it is quite clear that the defendant no.2 had approached to take the loan for her sole proprietorship i.e. defendant no.1. She cannot be permitted to take the stand that she was a housewife and had signed various documents of the bank innocently at the instance of her husband. Similarly defendant no.4 cannot revoke the guarantee agreement orally and that too without the consent and approval of the plaintiff bank. All the assets and liabilities of the Krishnaram Baldeo Bank Limited had been taken over by the plaintiff bank after the amalgamation which has been duly proved. In view of the same, I am of the opinion that the plaintiff bank is entitled to recover Rs.1,37,949.60/ from the defendants no.1, 2 and 4, after adjusting the sale proceeds of the pledged goods amounting to Rs.6,700/. The issue is decided in Suit No.32/05/76 Page numbers/Statistics Page numbers favour of the plaintiff bank and against the defendants no.1, 2 and
4. RELIEF
21.Keeping in view the observations made in the issues above, the suit of the plaintiff bank is decreed with costs for a sum of Rs.1,37,949.60/ (after giving adjustment of Rs.6,700/ received by plaintiff in lieu of sale of pledged goods) along with pendent lite & future interest @ 13% p.a. from the date of filing of the suit till its recovery against defendant no.1, 2 and 4. Decree sheet be prepared in terms of order. File be consigned to the record room.
PRONOUNCED IN THE OPEN COURT
th
ON: 5 July, 2010.
(SIDHARTH SHARMA)
ASCJ/DELHI.
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