Karnataka High Court
Sri C Gangadhara vs Sri Shanthi Narasaiah on 6 June, 2019
Equivalent citations: AIR 2020 (NOC) 81 (KAR), AIRONLINE 2019 KAR 1535 2019 (3) AKR 546, 2019 (3) AKR 546, AIRONLINE 2019 KAR 1535, 2019 (3) AKR 546 AIRONLINE 2019 KAR 1535
Author: H.B.Prabhakara Sastry
Bench: H.B. Prabhakara Sastry
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 6th DAY OF JUNE 2019
BEFORE
THE HON'BLE Dr. JUSTICE H.B. PRABHAKARA SASTRY
R.F.A.No.124 OF 2007
BETWEEN:
Sri. C.Gangadhara,
Aged about 44 years,
S/o. Chennaiah,
Residing at No.30,
Vivekananda Block,
Palace Guttahalli,
Mali Road,
Bangalore-560 003.
...Appellant
(By Sri. K.K.Vasanth, Advocate)
AND:
1. Sri. Shanthi Narasaiah,
Aged about 40 years,
S/o. R.Narasaiah,
Working as Senior Safaiwala,
Indian Air Lines Ltd.,
Bangalore-560 075.
And Residing at No.380,
Jagadishanagar,
New Thippasandra Post,
Bangalore-560 075.
R.F.A.No.124/2007
2
2. State Bank of India,
A body Corporate Constituted
Under the State Bank of India,
Act 1955 with its Corporate Centre,
Madam Kama Road,
Nariman Point,
Mumbai-21.
And Local Head Office at No.55,
St. Marks Road,
Bangalore and a Branch at
Banasawadi,
Known as Banasawadi Branch,
Rep. by its Manager.
...Respondents
(By Sri. S. Krishnaswamy, Advocate for R-2;
Service of notice to R-1 is held sufficient vide order
dated:25.08.2010)
***
This Regular First Appeal is filed under Order XLI,
Rules 1 and 2 of the Code of Civil Procedure, 1908, against
the judgment and decree dated:30.09.2006 passed in
O.S.No.751/2002 on the file of the XXIX Additional City Civil
and Sessions Judge, Bangalore City, (CCH-30), decreeing the
suit for recovery of money.
This Regular First Appeal coming on for Hearing, this
day, the Court delivered the following:
JUDGMENT
The present respondent No.2 had instituted the Original Suit against the present respondent No.1 and R.F.A.No.124/2007 3 present appellant arraying them as Defendant Nos.1 and 2 respectively in the court of the learned XXIX Additional City Civil and Sessions Judge (CCH -30), Bangalore City (hereinafter for brevity referred to as "Trial Court") in O.S.No.751/2002, seeking for recovery of a sum of `52,527/- with costs, current and future interest.
2. The summary of the case of the plaintiff - State Bank of India (SBI) in the Trial Court was that, the first defendant (respondent No.1 herein ) had availed a loan of a sum of `50,000/- from it for the purchase of consumer durables on the guarantee of the second defendant (appellant herein) on 09-02-1999, agreeing to repay the said loan amount in thirty-six equal monthly instalments at the rate of `1,800/- per month compounded quarterly. In that regard, the first defendant who is the principal borrower had executed an On-Demand Promissory Note and take Delivery Note cum Delivery letter dated 09-02-1999. The first R.F.A.No.124/2007 4 defendant also executed an Hypothecation Agreement of even date. The second defendant (appellant herein) had also executed a Guarantee agreement on 09-02-1999. After availing the loan, the defendants failed to repay the loan amount along with interest and committed default. Despite issuance of demands and legal notice, the defendants since committed default in repayment of the loan amount, the plaintiff - Bank was constrained to institute the present suit.
3. Even though summons were served, the first defendant did not choose to appear and contest the matter, as such, she was placed ex-parte. The second defendant (present appellant) appeared through his counsel and contested the matter. In his Written Statement, the second defendant denied the entire loan transaction including he executing the document (Guarantee Agreement), extending his guarantee-ship for the Principal Borrower and in favour of the plaintiff - R.F.A.No.124/2007 5 Bank. He denied that the first defendant had availed a loan of a sum of `50,000/- on the guarantee of the second defendant.
4. Based on the pleadings of the parties, the Trial Court framed the following issues for its consideration:-
"1] Does the plaintiff prove that the defendant No.1 on 29/1/1999 borrowed loan of Rs.50,000/- to purchase consumer durable item as contended in the plaint?
2] Does plaintiff further prove that defendant No.2 has acted as guarantor for the loan borrowed by defendant No.1 as contended in the plaint?
3] Does plaintiff further prove that defendants 1 and 2 have executed the loan documents and agreed to pay interest at the rate of 16.32% with quarterly rest as contended in the plaint?
4] Does plaintiff prove that the defendant 1 and 2 jointly and severally are liable to pay a sum of Rs.52,527/- to the plaintiff R.F.A.No.124/2007 6 including principal, interest and other charges as prayed?
5] Does defendant No.2 prove that he has not acted as guarantor and not executed any loan documents and so he is not liable to pay the suit amount to the plaintiff as contended in the written statement?
6] What decree or order?"
5. In order to prove its case, though the plaintiff - Bank got examined one Smt. Girija Bai as PW-1, due to the transfer of the said Bank official to another place and at the request of plaintiff, her evidence was discarded. Thereafter, one Sri. Rajendra, the Manager of the plaintiff - Bank was examined as PW-2 and Exhibits P-1 to P-9 were marked. The second defendant got himself examined as DW-1.
6. After hearing both side, the trial court by its impugned judgment and decree dated 30-09-2006 decreed the plaintiff's suit for a sum of `52,527/- R.F.A.No.124/2007 7 against both the defendants and also decreed for the interest at the rate of `6% per annum on the amount of `52,000/-. Challenging the said judgment and decree, the second defendant in the Trial Court has preferred this appeal.
7. Lower Court records were called for and the same are placed before this Court.
8. Heard the arguments of the learned counsel from both side and perused the material placed before this Court including the memorandum of appeal and the impugned judgment.
9. Despite service of notice, the respondent No.1 i.e. the alleged principal borrower did not choose to appear before this Court. The second respondent herein, i.e. the plaintiff- Bank appeared through its counsel.
R.F.A.No.124/20078
10. After hearing the learned counsel from both side, the only point that arise for my consideration is:
"Whether the appellant could establish that the judgment and decree under appeal deserves to be set aside?"
PW-2 - Sri. K. Rajendra in his Examination-in-chief has reiterated the contentions taken up by the plaintiff in the plaint. He has stated that, at the relevant point of time, he was the Manager of the plaintiff - Bank. He has given the details about the alleged loan transaction wherein he has stated that the first defendant was the borrower of a loan for the domestic articles as such she was granted with the loan of a sum of `50,000/-, for the repayment of which loan amount together with interest there upon, the second defendant had extended his guarantee. The witness has also stated that it was confirmed after going through the invoice issued by one R.F.A.No.124/2007 9 M/s. Nandagokula Electronics from whom the principal borrower had intended to purchase the domestic utilities. In support of his evidence, the witness got marked loan application at Ex.P-1, sanction letter issued by the plaintiff - Bank at Ex.P-2, D.P. Note Delivery letter executed by the loanee at Ex.P-3, Hypothecation Agreement said to have been executed by the principal borrower at Ex.P-4, Guarantee Agreement said to have been executed by the guarantor i.e. the present appellant at Ex.P-5, proforma invoice said to have been issued by the supplier of the articles i.e. M/s. Nandagokula Electronics at Ex.P-6, consideration receipt at Ex.P-7, office copy of the legal notice at Ex.P-8 and statement of the loan account at Ex.P9.
In the cross-examination of PW-2 made by defendant No.2, though attempts were made to elicit that no such loan transaction has taken place whereby the defendant No.2 is said to have stood as a guarantor, R.F.A.No.124/2007 10 but, these suggestions were not admitted as true by this witness.
PW-2 has given some more details about the loan transaction. He has stated in his evidence that the plaintiff - Bank had issued a pay order in favour of M/s. Nandagokula Electronics, however, he has admitted that he has not produced any document to show about the articles said to have been delivered to the defendant No.1 or the details of the pay order said to have been issued by the plaintiff - Bank in favour of M/s. Nandagokula Electronics.
The said witness also stated that his Bank has not conducted the inspection to ascertain whether the goods were delivered to the defendant No.1.
11. The defendant No.2 as DW-1 in the form of Affidavit evidence in his Examination-in-chief, has reiterated the contentions taken up by him in his Written Statement. He has denied the alleged loan R.F.A.No.124/2007 11 transaction including he standing as a guarantor to the alleged loan transaction. In his further cross- examination, he has admitted his signature in the documents at Exs.P-3 and P-5 which are Delivery Note and Guarantee Agreement respectively. He has also stated in his cross-examination that while signing, he has ascertained as to what those documents are about and then he has put his signature. However, he denied the suggestions that he was a guarantor and that he knew well about his liability as a guarantor in the loan transaction.
12. In the light of the above pleadings and evidence of the parties, it was the argument of the learned counsel for the appellant that, the loan was not disbursed to the supplier of the goods, i.e. M/s. Nandagokula Electronics, but, it was credited to the Personal Account of the defendant No.1, as such, the R.F.A.No.124/2007 12 term of the loan Agreement was not complied with by the Bank.
In that regard, he drew the attention of the Court to Clause (7) of the sanction letter of the loan which is marked at Ex.P-2. According to the said term, the loan amount was to be disbursed directly to the supplier to the extent of the cost of the article. Even though there are no documents in the form of a receipt issued by the said M/s. Nandagokula Electronics about the receipt of the said loan amount, PW-2 in his evidence has stated that the plaintiff - Bank has issued the pay order in favour of M/s. Nandagokula Electronics. Further, if at all no such loan amount was disbursed or no articles were delivered to the principal borrower, then, it was for the principal borrower i.e. defendant No.1 to have questioned the same about the non-disbursement of the loan to the supplier of the goods or non-delivery of the goods by the supplier to her. In the absence of R.F.A.No.124/2007 13 defendant No.1 contesting the matter and taking any stand in that regard, the defendant No.2 as a guarantor, in the circumstances of the case and more particularly, in the light of the terms of his Guarantee Agreement at Ex.P-5, cannot raise such a contention. Some of the relevant terms of the Guarantee Agreement which would come to the aid of the plaintiff - Bank in that regard are Clause No.5, Clause No.8 and Clause No.8 (A) of Ex.P-5.
13. A reading of those clauses in the Guarantee Agreement at Ex.P-5 makes it very clear that, the said Guarantee Agreement is independent and distinct from any security that the Bank has taken or may take in any manner whatsoever, whether it be by way of hypothecation, pledge and/or movable goods or in any other manner. Further it also says that the guarantor cannot absolve from his liability even though there would be any variation made to the terms of the R.F.A.No.124/2007 14 Hypothecation Agreement dated 09-02-1999 or any other Agreement or letter inter alia including variation in the rate of interest, extending the date of payment of the instalments and on which the loan has been made or any composition made between the Bank and the borrower or any agreement on the part of the Bank to give time to or not to sue the borrower or the Bank parting with any of the securities given by the Borrower. Thus, the above said Clauses in the Agreement restrict the scope of the guarantor to only certain aspects and makes him binding and answerable to the alleged liability almost under all circumstances. As such, the argument of the learned counsel for the appellant that the loan was not disbursed to the supplier of the article, as such, the guarantor was not liable, is not acceptable.
14. Secondly, the argument of the learned counsel for the appellant is that, the loan was not credited to the supplier's account, but, it was credited to the principal R.F.A.No.124/2007 15 borrower's account. In that regard, he drew the attention of this Court to Ex.P-9. The said Exhibit is not the personal account of the principal borrower in the nature of Savings Bank or Current Account. Admittedly, it is a loan account statement maintained by the Bank with respect to the loan disbursed to the principal borrower. As such, the entries made showing that the said sum of `50,000/- which is reflected in the debit column would go to show that the debit balance of `50,000/- is a liability of the principal borrower towards the principal loan amount. Subsequently, the entries are there towards the instalments paid by the borrower and the interest accrued on the loan amount. Therefore, the said statement of account cannot be construed as the one showing the credit of the loan amount to the individual and personal account of the loanee i.e. the principal borrower. As such, the said second argument R.F.A.No.124/2007 16 of the learned counsel for the appellant on the said point is also not acceptable.
15. Thirdly, the learned counsel for the appellant also canvassed an argument on the point that the goods were required to be hypothecated to the Bank as per Condition No.9 of Ex.P-2. But there are no documents to show that the goods were hypothecated to the Bank after its actual delivery from the supplier.
16. A perusal of Ex.P-2 which is a sanction letter, no doubt, would go to show that the condition of the sanction of the loan was against the security primarily as against the hypothecation of the articles in favour of the Bank and also as against the guarantee of the third party, which in the instant case is upon the guarantee said to have been extended by the present appellant who was defendant No.2 in the Court below. In view of the said fact that the non-mentioning of the name of the article in the Hypothecation Deed or not physically R.F.A.No.124/2007 17 showing the possession of those articles, it cannot be taken that there was no hypothecation of the goods in favour of the Bank. Ex.P-4 which is a Hypothecation Agreement in its term makes the said point very clear.
Further, as already observed above, the Guarantee Agreement, more particularly, its clause at Sl.No.5 would make a Guarantee Agreement independent and distinct of Hypothecation Agreement, since it is stated that the appellant as a guarantor has executed the said Guarantee Agreement, now he cannot revert back and say that there was no hypothecation of the goods.
In addition to the above, a point that is also required to be noticed here is that, the appellant as defendant No.2 in the Trial Court no where in his Written Statement has taken any such pleading about the absence of disbursement of the loan amount to the supplier of the goods or about the alleged non- hypothecation of the goods in its actual physical form in R.F.A.No.124/2007 18 favour of the Bank. Further, those aspects also have not been put to defendant No.2 in his cross- examination of the evidence. As such also, in the absence of any pleading or evidence from the defendants' side, a question of fact cannot be considered in the argument stage by an appellate Court. Even otherwise also, as observed above, the said stand of the appellant would not hold good.
17. Lastly, the contention of the appellant is that there is no execution of Guarantee Agreement from the appellant in favour of the Bank. No doubt learned counsel for the appellant rightly submitted that mere signing of a piece of paper would not be treated as an execution of a document. In that regard, when we see the Guarantee Agreement at Ex.P-5 and the evidence of both PW-2 and DW-1, it can be seen that Ex.P-5, as already observed above, is a Guarantee Agreement R.F.A.No.124/2007 19 shown to have been executed by the present appellant, in his capacity as a guarantor to the alleged loan.
18. The present appellant in his cross-examination as DW-1 has himself stated that he has signed the document only after knowing the nature of the document. Further, he has admitted his signature in Ex.P-3 at Ex.P-3(a) as also in Ex.P-5 at Ex.P-5(a). Thus, when he himself has stated that he would not sign the document without knowing the nature of the document and has admitted his signature in the Guarantee Agreement, it is clear that it is only after knowing the nature of the document that he has subscribed to it and has executed the document.
Furthermore, PW-2 in his evidence has stated that he was the Manager of the plaintiff - Bank at the relevant point of time and that those documents were executed in his presence. As such, the last phase of the R.F.A.No.124/2007 20 argument of the learned counsel for the appellant that there was no execution of the Guarantee Agreement by the defendant No.2/appellant herein, is also not acceptable.
19. Barring the above, no other points of arguments worth to be considered by this Court are forwarded by the learned counsel for the appellant, as such, I am of the view that the Trial Court after appreciating both oral and documentary evidence placed before it has analysed the evidence in its proper perspective and has come to a correct finding answering the issues in favour of the plaintiff and holding the defendants before it as jointly and severally liable to pay the suit claim together with interest there upon to the plaintiff. As such, I do not find any reason for interfering in the said judgment and decree passed by the Trial Court.
Accordingly, I proceed to pass the following:- R.F.A.No.124/2007 21
ORDER [i] The appeal is dismissed.
[ii] The judgment and decree passed by the XXIX Additional City Civil and Sessions Judge (CCH-30), Bangalore City dated 30-09-2006 in O.S.No.751/2002 is hereby confirmed.
In view of dismissal of the main appeal, I.A.No.2/2007 filed for stay does not survive for consideration.
Registry to transmit a copy of this judgment along with the Lower Court records to the concerned Trial Court immediately.
Sd/-
JUDGE BMV*