Kerala High Court
Federal Bank Ltd vs C.K. Jayapalan on 31 July, 1998
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT:
THE HONOURABLE MR.JUSTICE V.CHITAMBARESH
&
THE HONOURABLE MR. JUSTICE K.RAMAKRISHNAN
WEDNESDAY, THE 29TH DAY OF JUNE 2016/8TH ASHADHA, 1938
AS.No. 354 of 1999 (C)
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AGAINST THE JUDGMENT IN OS 41/1993 of SUB COURT, MAVELIKKARA
DATED 31-07-1998
APPELLANT/PLAINTIFF:
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FEDERAL BANK LTD., MANKAMKUZHY BRANCH
BY ADVS.SRI.ROY CHACKO
SRI.P.S.GEORGE
SRI.JOHN NUMPELI (JUNIOR)
SRI.P.C.CHACKO(SR.)
RESPONDENT(S):
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1. C.K. JAYAPALAN, CHARUVIL HOUSE,
MANKAMKUZHY P.O, VETTIYAR VILLAGE.
2. M/S. M.O. HASSAN KUTHOOS MARICAR LTD.,
121 M.G. ROAD, MUTHIALPAT, PONDICHERRY-605 003.
R2 BY ADV. SRI.D.KRISHNA PRASAD
R2 BY ADV. SRI.JOJI VARGHESE
R2 BY ADV. SRI.M.HARISHARMA
R1 BY ADV. SRI.VPK.PANICKER
THIS APPEAL SUITS HAVING BEEN FINALLY HEARD ON 20-06-2016
ALONG WITH A.S.NO.457/1999, THE COURT ON 29.6.2016 DELIVERED THE
FOLLOWING:
V. CHITAMBARESH & K. RAMAKRISHNAN, JJ.
..................................................
A.S.No.354 of 1999
&
A.S.No.457 of 1999
.......................................................
Dated this the 29th day of June, 2016.
"CR"
JUDGMENT
K. RAMAKRISHNAN, J:
The plaintiff in O.S.No.41/1993 on the file of the Sub Court, Mavelikkara is the appellant in A.S.No.354/1999 and the plaintiff in O.S.No.40/1993 on the file of the same court is the appellant in A.S.No.457/1999. O.S.Nos.40/1993 and 41/1993 were filed by the plaintiff M/s.Federal Bank, Mankamkuzhy branch originally against defendants 1 and 2 for realization of amount due under a loan agreement. The first defendant along with one Purushothaman availed a loan of Rs.1,03,000/- each under two loan arrangement for purchasing two new Deluxe Diesel Ambassador Cars and applied for the same and the same was granted and they have jointly executed a medium term loan agreements on 30.1.1990 hypothecating the vehicles which will be purchased by the defendants using the amount in favour of the plaintiff bank. Purushothaman died on 5.8.1991 and his legal representative, his mother was the second defendant in the case. They had agreed to pay interest at the rate of 12.5% with additional interest of 2% over and above 12.5% in case of default in payment of installment and process fee of .05% per annum. They had also undertaken that they will pay the interest rate subject to the A.S.No.354 of 1999 & A.S.No.457 of 1999 2 change from time to time, that will be increased as per the directions of the Reserve Bank of India. The loan amount had to be paid in 48 installments commencing from 28.2.1990. If they committed any default, the plaintiff bank was entitled to realize the same in lump. They also executed an article of agreement agreeing to hypothecate the vehicles. As collateral security, the first defendant and Purushothaman deposited title deeds of the plaint schedule property on 30.1.1990 intending to create an equitable mortgage on the plaint schedule property. Equitable mortgage was confirmed again on 1.2.1990 by the defendants by sending a confirmation letter. They committed default in payment of the amount and in spite of the demand made on 14.6.1991, they did not pay the amount, but they sent a reply stating that the vehicles were not delivered by the dealer and they filed a petition before the State Consumer Dispute Redressal Commission, Thiruvananthapuram and obtained an order against M/s.
Hassan Kuthoos Maricar Pvt. Ltd directing them to deliver the vehicle and pay interest at the rate of 12.5% but the vehicles were not delivered. So they are not liable to pay the amount and the plaintiff is not entitled to recover the amount from them.
2. The contentions raised by them is not tenable. Defendants 1 and 2 are liable to pay the amount. So they filed the above suits for realization of Rs.1,99,104/- with interest and costs by sale of the A.S.No.354 of 1999 & A.S.No.457 of 1999 3 mortgaged property in O.S.No.40/1993 and for realization of the amount of Rs.1,99,110/- with interest and costs by sale of mortgage of property in that suit.
3. Defendants 1 and 2 in both the cases filed written statements raising common contentions. They contended that the suit is not maintainable. The plaintiff bank is not properly represented. They have suppressed the materials facts. They admitted that they have availed loan for purchasing Ambassador cars on hire purchase basis and they have deposited margin money and along with the margin money, the plaintiff bank sent demand draft to the dealer M/s. M.O.Hassan Kuthoos Maricar, Ltd., Pondicherry on 30.1.1990 and the dealer issued receipt dated 6.2.1990 in favour of the plaintiff. The part played by the dealer of the vehicle is suppressed in the plaint. The suit is bad for non joinder of dealer of the vehicles. The dealer company to whom the amounts were paid did not deliver the vehicle and as such, they could not repay the loan. The co-obligant, Purushothaman died on 4.8.1991. The failure to pay the amount is not willful, but due to the non-delivery of the vehicles by the dealer. So they are not liable to pay penal interest. They admitted the execution of the document in favour of the plaintiff bank and liability to pay the amount in equal monthly installments. According to them, the default of payment of the amount occurred due to the failure of the dealer company in not A.S.No.354 of 1999 & A.S.No.457 of 1999 4 delivering the vehicles. No letter of acknowledgment of debt or confirmation letter was given by the defendants and late Purushothaman on 31.3.1991. When they received notice, they sent reply stating the real state of affairs and their inability to pay the amount. They also informed the plaintiff that they have filed a complaint before the Kerala State Consumer Dispute Redressal Commission, Thiruvananthapurm regarding the same. They also contended that they are moving an application under Order VIIIA of Code of Civil Procedure to implead the third party notice of the dealer company, who is a necessary party in the case. If at all any amount is due, the same has to be realized by the plaintiff from the third party- the dealer and the defendants are entitled to get indemnified for the amounts due to the bank from the dealer company. The defendants are also entitled to get a decree for realization of the margin money with interest namely Rs.1,17,750/- (Rs.92,750/- + Rs.25,000) against the third party. They also entitled to get compensation of Rs.25,000/- . So they are entitled to make a counter claim for Rs.1,17,750/- (Rs.92750 +25000 against the third party). They prayed for dismissal of the suit as against them and prayed for decree of the counter claim against the third party dealer to be impleaded.
4. On the basis of the claim made by the defendants as per order A.S.No.354 of 1999 & A.S.No.457 of 1999 5 in I.A.No.887/1994, the additional third respondent was impleaded in O.S.No.40/1993 and as per order in I.A.No.888/1994 in I.A.No.41/1993 under Order VIII rule 1 of the Code of Civil Procedure.
5. The additional third respondent entered appearance and filed statement in both the cases contending that the first defendant and his brother Purushothaman booked two Ambassador cars for Rs.1,48,675/- each and the amounts were deposited by way of demand drafts drawn through the plaintiff bank. The demand draft was handed over to the third defendant's office at Pondicherry on 5.2.1990 and as per the terms of the contract, within eight weeks from the date of booking, the delivery will have to be effected at Pondicherry and subject to the availability of vehicles from the manufactures M/s. Hindusthan Motors, Calcutta. Due to various production constrains in the factory, the third defendant could not able to deliver the vehicle within time. In the meantime, the price of the vehicle went up due to fresh taxes and duties and this fact w as made known to defendants 1 and 2. As per the agreement, the price payable to the vehicle is the price prevailing on the date of delivery irrespective of the price quoted in the invoice. The defendants were not prepared to remit the enhanced rate of Rs.9,725/- each but insisted the delivery of the vehicle at the quoted rate as per the invoice. Subsequently they filed complaint No.41/1993 before the A.S.No.354 of 1999 & A.S.No.457 of 1999 6 State Consumer Dispute Redressal Commission, Thiruvananthapuram for a direction to the third defendant to deliver the vehicle. The case was posted for hearing to 5.2.1991. On 4.2.1991 the third defendant sent a telegram informing defendants 1 and 2 that they were prepared to deliver the vehicles but no reply was received from them. When the complaint came up for hearing on 5.2.1991, the defendant's counsel submitted before the Commission that they were prepared to deliver the vehicle on payment of price prevailing on the date of delivery and they will be compensated for the delay by paying 17% interest for the amount remitted towards the price and this amount will be adjusted towards the price of the car. On the basis of the above, State Commission passed a compromise order directing the third defendant to deliver the car within 30 days from that date and defendants 1 and 2 should pay the price prevailing on the date of delivery and the vehicles must be delivered at Mahe. The vehicles were ready on 3.2.1991 and this was conveyed by the defendants on 5.2.1991. They waited for the reply to their telegram dated 5.2.1991. Since there was no response, they sent another telegram on 6.2.1991 and 13.1.1991 with the same request, but there was no response.
6. Again on 20.3.1991 they received a communication from State Commission and though they were prepared to deliver the A.S.No.354 of 1999 & A.S.No.457 of 1999 7 vehicle at Mahe and there was some formalities like payment of balance amount, registration fee, tax etc had to be made at Pondicherry and that was the reason for the delay. The vehicles were available in the showroom at Pondicherry and it had to be inspected and it had to be done from Pondicherry before it was transported to Mahi. These facts were informed to Purushotham and the first defendant through their counsel as well as their Manager, Mr. Fernandez but they were not prepared to come to Pondicherry and complete the formalities and that was the reason for the delay in making delivery. In spite of all these things, the first defendant and his brother Purushothaman did not take delivery of the vehicles . When the execution petition was filed, they filed objection stating that they were prepared to deliver the vehicle at Mahe, if the above conditions are satisfied, but State Commission ordered to pay Rs.5,84,700/- to the defendants 1 and 2.
7. They filed an appeal before the National Commission and National Commission set aside the order and remanded the case to the State Commission to decide the rights of the parties in accordance with the compromise order dated 5.2.1991. Thereafter defendant No.1 and his brother Purushothaman did not press for the claim and the complaint was withdrawn by defendants 1 and 2 with liberty to agitate the matter before the civil court when the suits filed by the A.S.No.354 of 1999 & A.S.No.457 of 1999 8 bank are pending. The third defendant filed objection to the counter claim denying the allegations and also opposed the counter claim on the grounds of res judicata and want of jurisdiction and barred by limitation. Since there was no loan arrangement between the bank and the third respondent, there was no question of any liability to indemnify them arises. Since the defendants did not co-operate with the delivery of the vehicles, the vehicles could not be delivered. So they are not liable to pay any compensation and they have no liability to indemnify the plaintiff bank and pay the amount to the bank as well. So they prayed for dismissal of the counter claim and the suit as against them.
8. During the pendency of the suit, the second defendant died and the first respondent was recorded as her sole legal representative. Both the cases were tried jointly. The officer of the bank was examined as PW1 and Exts.A1 to A11 series and A12 series were marked on the side of the plaintiff. The first defendant was examined as DW1 and the officer of the third defendant was examined as DW2 and Exts.B1 and B17 were marked on their side.
9. After considering the evidence on record, the court below found that the defendants 1 and 2 are liable to pay the amount to the bank, but invoking section 70 of the Contract Act held that the third defendant is liable to pay the amount to the bank as an indemnifier of A.S.No.354 of 1999 & A.S.No.457 of 1999 9 the defendants 1 and 2 and directed the plaintiff bank to recover the amount from the third defendant. The court below also allowed the counter claim made by the defendants 1 and 2 against the third defendant and directed them to pay the sum of Rs.45,675/- with 6% interest from 5.2.1990 and Rs.25,000/- with 12.5% interest from the date of suit till realization in both the cases against the third defendant to be payable to defendants 1 and 2 in both the cases. Though the third defendant filed appeals against the direction to pay the amount to the bank and also allowing the counter claim, they were rejected for non payment of balance court fee, which was conceded by both the counsel. Dissatisfied plaintiff in both the cases, filed the above appeals against denial of the right of the bank to recover the amount from defendants 1 and 2 by sale of the mortgaged property and directing them to recover the amounts from the third defendant in both the cases.
10. Heard Sri.Roy Chacko, learned counsel appearing for the appellant in both the cases and Sri.V.P.K. Panicker, learned counsel appearing for the first respondent and Sri.D. Krishnaprasad appearing for the second respondent.
11. Learned counsel for the appellant submitted that having found the liability to pay the amount by the defendant 1 and 2, the court below ought to have passed a decree against defendants 1 and A.S.No.354 of 1999 & A.S.No.457 of 1999 10 2 and permitted the bank to realize the amount by sale of the property mortgaged. There was no privity of contract between the plaintiff and the third defendant and as such, the court below was not justified in directing the plaintiff to recover the amount from the third defendant. So the decree to that extent is bad in law and the same is liable to be set aside and they prayed for a decree against the first defendant as the first defendant, is the sole surviving debtor in the case and he is the legal heir of the second defendant as well.
12. On the other hand, learned counsel for the first respondent submitted that there is a quasi contract whereby the dealer is liable to indemnify the purchaser for non delivery of the vehicle and the amount was paid directly to the dealer by the bank and as such, they are liable to indemnify the purchaser and pay the amount due from defendants 1 and 2 to the bank. So the court below was perfectly justified in directing the third defendant to pay the amount exonerating defendants 1 and 2 from the liability.
13. On the other hand, learned counsel for the second respondent submitted that there is no privity of contract between the bank and the third defendant.
14. It is an admitted fact that the first respondent herein along with one Purushothaman decided to purchase two Ambassador diesel cars from the third defendant company, for which they approached A.S.No.354 of 1999 & A.S.No.457 of 1999 11 the appellant bank for loan and the loan was sanctioned and it was availed by the said Purushothaman and the first defendant. The fact that they executed the necessary documents including the hypothecation agreement etc in favour of the plaintiff bank is not in dispute. The fact that the plaint schedule property was mortgaged as security for the loan amount in both the cases is also not in dispute. There is no dispute regarding the payment of the amount, as requested by them, to the third defendant for this purpose as well. The fact that they committed default in payment of the amount is also not in dispute. According to them, the vehicles were not delivered as promised by the third defendant and that resulted in non payment of the amount is the defences taken by them. It is also seen from the documents produced that the first defendant along with Purushothaman filed a complaint before the State Consumer Dispute Redressal Commission,Thiruvananthapuram against the third defendant directing them to deliver the vehicles and it is also an admitted fact that there was a compromise entered into between the parties that on certain conditions being complied with, the vehicle will be delivered at Mahe on the basis of which Ext.B1 order was passed by the State Commission. Since it was not delivered, according to the defendants 1 and 2, they filed an execution petition before the State Consumer Forum and the Consumer Forum passed an order evidenced A.S.No.354 of 1999 & A.S.No.457 of 1999 12 by Ext.B2, rejecting the contentions of the third defendant and directing them to pay a compensation of Rs.5,84,700/- to the first respondent and Purushothaman. This was challenged by the third defendant before the National Consumer Forum and as per Ext.B12, order of the State Consumer Redressal Forum was set aside and it was sent back for considering the question again on the basis of the compromise order passed to find out as to who was at fault. It is also an admitted fact that the above complaint was withdrawn by the defendants 1 and 2 with liberty to agitate their contentions before the civil court where the case is pending evidenced by Ext.B14 order of the State Commission.
15. Section 70 of the Contract Act reads as follows:
"70. Obligation of person enjoying benefit of non- gratuitous act.- Where a person lawfully does anything for another person, or delivers anything to him, not intending to do so gratuitously, and such other person enjoys the benefit thereof, the latter is bound to make compensation to the former in respect of, or to restore, the thing so done or delivered".
There must be a contract between the parties and by virtue of the contract, one party must have obtained an unlawful enrichment and if such unlawful enrichment is there, then the person who obtained the unlawful enrichment is bound to make compensation to the person A.S.No.354 of 1999 & A.S.No.457 of 1999 13 from whom he obtained the amount. In this case, there is no contract between the plaintiff, defendants 1 and 2 and the third defendant regarding the loan transaction. The dictum laid down in the decisions reported in Mulam Chand v. State of M.P (AIR 1963 SC 1218) and State of West Bengal v. S.D. Mandal and sons (AIR 1962 SC 779) relied on by the court below reiterating the principle laid down in section 70 of the Contract Act are not applicable to the facts of this case so as to direct the plaintiff to recover the amount from the third defendant on the basis of the implied contract of indemnity for the third defendant to indemnify defendants 1 and 2 on the basis of the contractual obligations between the defendants regarding the supply of the car.
16. Order VIII A reads as follows:
Third Party Procedure
1. Third party notice:- Where a defendant claims to be entitled to contribution from or indemnity against any person not already a party to the suit (hereinafter called a third party) he may, by leave of the Court, issue a notice (hereinafter called a third-party notice) to that effect, sealed with the seal of the Court. The notice shall state the nature and grounds of the claim. Such notice shall be filed into Court with a copy of the plaint and shall be served on the third party according to the rules relating to the service of summons.
2. Effect of notice:- The third party shall, as from the A.S.No.354 of 1999 & A.S.No.457 of 1999 14 time of the service upon him of the notice, be deemed to be a party to the action with the same rights in respect of his defence against any claim made against him and otherwise as if he had been duly sued in the ordinary way by the defendant.
3. Default of third party:- If the third party desires to dispute the plaintiff's claim in the suit as against the defendant on whose behalf the notice has been given, or his own liability to the defendant the third party may enter appearance in the suit on or before the date fixed for his appearance in the notice. If he does not enter appearance he shall be deemed to admit the validity of the decree that may be obtained against such defendant, whether by consent or otherwise, and his own liability to contribute or indemnify, as the case may be, to the extent claimed in the third party notice:
Provided always that a person so served and failing to appear may apply to the Court for leave to appear, and such leave may be given upon such terms if any, as the Court shall think fit.
4. Procedure on default:- Where the third party does not enter appearance in the suit and the suit is decreed by consent or otherwise in favour of the plaintiff, the Court may pass such decree as the nature of the case may require, against the third party and in favour of the defendant on whose behalf notice was issued:
Provided that execution thereof shall not be issued A.S.No.354 of 1999 & A.S.No.457 of 1999 15 without leave of the Court until after satisfaction by such defendant of the decree against him.
5. Third party directions:-If the third party enters appearance, the defendant on whose behalf notice was issued may apply to the Court for directions; and the Court may, if satisfied that there is a question to be tried as to the liability of the third party to make the contribution or pay the indemnity claimed, in whole or in part, order the question of such liability, as between the third party and the defendant giving the notice to be tried in such manner, at or after the trial of the suit, as the Court may direct; and, if not so satisfied, may pass such decree or order as the nature of the case may require.
6. Leave to defend: The Court may, upon the hearing of the application mentioned in Rule 5, give the third party liberty to defend the suit upon such terms as may be just, or to appear at the trial and make such part therein as may be just, and generally may order such proceedings to be taken, documents to be delivered or amendments to be made and give such directions as appear proper for the most convenient determination of the question or questions in issue, and as to the mode and extent in or to which the third party shall be bound or made liable by the decree in the suit.
7. Costs:- The Court may decide all questions of costs, as between the third party and the other parties to the suit, A.S.No.354 of 1999 & A.S.No.457 of 1999 16 and may order any one or more to pay the costs of any other, or others, or give such directions as to costs as the justice of he case may require.
8.Questions between co-defendants:- Where a defendant claims to be entitled to contribution from or indemnity against any other defendant to the suit, a notice may be issued and the same procedure shall be adopted for the determination of such questions between the defendants as would be issued and taken, if such last mentioned defendant were third party; but nothing herein contained shall prejudice the rights of the plaintiff against any defendant in the suit.
9. Further parties:- Where any person served with a third party notice by a defendant under these rules claims to be entitled to contribution from or indemnity against any person not already a party to the suit, he may, by leave of the Court, issue a third party notice to that effect, and the preceding rules as to the third party procedure shall apply mutatis mutandis to every notice so issued and he expressions"third party notice"
and "third party" in these rules shall apply to and include every notice so issued and every person served with such notice respectively".
17. In order to attract Order VIII A rule 1 or 5, it must be proved by defendants 1 and 2 that there was an admission on the part of the third party undertaking to pay the liability of defendants 1 and 2 to A.S.No.354 of 1999 & A.S.No.457 of 1999 17 another person in the event of any default on their part. Only if there is such admission of a contract of indemnity or right of indemnification provided, this provision is not applicable. In this case, admittedly there is understanding between the third defendant and defendants 1 and 2 that in the event of any breach committed by them, they will indemnify them for the loss, if any suffered and that amount will be paid to the person to whom defendants 1 and 2 are liable to pay. The decisions relied on by the counsel for the 1st respondent namely Parasmal Chordia v. Rajalakshmi Ammal and another (AIR 1970 Mad.47) and Dr.L.Prabhakara Prabhu v. Canara Bank and others (AIR 1996 Ker 297) are not applicable to the facts of this case. Even in those decisions it has been clearly observed that unless there is a contract of indemnity between the party defendants and the third party in order to indemnify the party defendants for an amount payable to a particular person, the provisions of order VIII A are not applicable.
18. Even if there is any alleged default on the part of the third defendant in delivering the vehicle, is not a condition precedent for repaying the loan amount to the bank by defendants 1 and 2 and it is an independent cause of action available to them to claim damages from the third defendant, if they were made to pay the amount as a loss sustained by them by filing an independent suit and not to be A.S.No.354 of 1999 & A.S.No.457 of 1999 18 decided in the present suit as there is no privity of contract between the plaintiff and the third defendant or any contract of indemnity entered into between defendants 1 and 2 and the third defendant to pay off the liability to the bank which has to be decided in the suit between the plaintiff bank and defendants 1 and 2 who are the borrowers of the bank. So under the circumstances, the court below was not justified in directing the plaintiff bank to recover the amount from third defendant on the basis of the alleged implied contract of indemnity which was not there in fact exonerating defendants 1 and 2 from payment of liability to the bank. Probably the court could have granted the relief to defendants 1 and 2 to work out their remedy against the third defendant to realize the amount in appropriate forum in accordance with law instead of exonerating them from the payment of liability to the plaintiff bank and fastening the liability on the third party namely the third defendant in this case. So the decree and judgment passed by the court below to the extent directing the plaintiff bank to recover the amount from the third defendant is set aside and the first defendant in the suit is directed to pay the amount decreed with interest and costs as provided in the judgment within a period of four months and if the amount is not paid, then the plaintiff bank is permitted to recover the amount by sale of the mortgage property scheduled to the plaint in execution of the decree in both A.S.No.354 of 1999 & A.S.No.457 of 1999 19 suits.
So the appeals are allowed and the decree and judgment of the court below to the extent directing the plaintiff bank to recover the amount from the third defendant is set aside and the first defendant is directed to pay the amount decreed with interest and costs as provided in the decree within a period of four months and if the amount is not paid within that time, the plaintiff bank is permitted to realize the amount by sale of the mortgaged property in accordance with law in both the cases and if the sale proceeds are not sufficient to discharge the liability due to the bank, then the plaintiff bank is permitted to proceed against the first defendant personally for the balance amount due in accordance with law. The first defendant is granted the liberty to work out his remedy against third defendant to realize the amount or any compensation for their alleged default by approaching appropriate forum in accordance with law. Considering the circumstances of the case, the parties are directed to bear their respective costs in the appeals.
The appeals are allowed and disposed of accordingly.
Sd/ V. CHITAMBARESH, JUDGE.
Sd/-
K. RAMAKRISHNAN, JUDGE.
cl /true copy/
P.S to Judge
A.S.No.354 of 1999
&
A.S.No.457 of 1999 20
V. CHITAMBARESH &
K. RAMAKRISHNAN, JJ.
.......................................... A.S.No.354 of 1999
& A.S.No.457 of 1999 .......................................... 29th day of June, 2016.
JUDGMENT