Delhi District Court
Guru Nanak International Pvt Ltd vs Bank Of India on 6 November, 2025
IN THE COURT OF SH MUKESH KUMAR GUPTA
DISTRICT JUDGE(COMMERCIAL)-07(CENTRAL)
TIS HAZARI COURTS: DELHI
CS (Comm.) No. 555/2018
CNR No. DLCT01-0163892018
(Old Case: More than 7 years old)
20 oldest cases of Court}
M/s Guru Nanak International Pvt. Ltd.,
C-7, Rajouri Garden,
New Delhi-110002
......Plaintiff.
Vs
1. Bank of India,
Karol Bagh Branch,
New Delhi-110005,
2. Assistant General Manager,
Bank of India,
Karol Bagh, New Delhi-110005
3. Chief Manager,
Bank of India,
Karol Bagh, New Delhi-110005
...... Defendants.
Digitally signed
MUKESH by MUKESH
KUMAR GUPTA
KUMAR Date:
GUPTA 2025.11.06
16:58:39 +0530
CS (Comm.) No.555/2018 Guru Nanak International Pvt. Ltd. Vs. Bank of India & Ors. Page no. 1 of 72
SUIT FOR RECOVERY OF RS. 40,53,648/-
Date of institution of suit : 04.12.2018
First Date before this court : 04.04.2024
Date on which reserved : 31.10.2025
Date of Judgment : 06.11.2025
Appearance(s) : Ms. Sonia Sharma, Ld. Counsel for the plaintiff.
Shri Jaspreet Singh, Ld. Counsel for the defendants.
JUDGMENT
(A) PRELUDE:
1. By way of present judgment, I shall conscientiously adjudicate upon the plaintiff's suit for Recovery of Rs.40,53,648/- alongwith interest @ 18% per annum pendentlite and future against the defendant. The plaintiff has also prayed for costs of the suit.
(B) PLAINTIFF'S CASE
2. Eschewing prolix reference to the pleadings crystallizing the same the plaintiff has averred in the plaint that:-
2.1) The plaintiff is a Private Company registered under the name and style of M/s Guru Nanak International Pvt. Ltd. and engaged in the business of manufacturing of wearing apparel. The plaintiff company has been one of the reputed customers of the defendant No.1 bank for more than 40 years and has started a new retail business in the year 2012 and since then had received overwhelming response for retails from Digitally signed NRI's and Local Customers. The present suit has been instituted through MUKESH by MUKESH KUMAR GUPTA KUMAR Date:
GUPTA 2025.11.06 16:58:49 +0530 CS (Comm.) No.555/2018 Guru Nanak International Pvt. Ltd. Vs. Bank of India & Ors. Page no. 2 of 72 its Authorized Representative Mr. Parminder Dev Sharma who is authorised to file the suit vide Board Resolution dated 29.11.2018.
2.2) Defendant No.1 is a nationalized bank and has its Zonal Offices across India and abroad and the defendants No.2 and 3 are the Assistant General Manager and Chief Manager of the defendant No.1 bank at Karol Bagh Branch, New Delhi Zone. The defendant No.1 bank provides various banking services including credit facility to its customers. The plaintiff has made good rapport and relations with defendant bank No.1 and extended all the co-operation to it as a good customer.
2.3) In the year 2013, the plaintiff has requested the defendant No.1 bank for credit facilities which offered the same vide its letter dated 15.01.2013 and 28.03.2014 by opening a Cash Credit Account no.
600630110000033 on broad terms & conditions for the Financial year 2013-14 and 2014-15. Thereafter, the interest on both of the credit facilities i.e. Cash Credit Facilities and Term Loan facility has been increased from 12.60% per annum to 15.10% and from 13.10% to 15.60% respectively illegally and without any reason and without informing the plaintiff. Though the defendants had conveyed the plaintiff that, as bonus, last renewal of credit facilities was undertaken at - BASE RATE+3.90% (for CASH CREDIT) and BASE RATE + 4.40% (for TERM LOAN) facilities, however, in the renewal made as on 10.03.2016, the defendant No.1 bank revised the same to BASE RATE +5.40% (FOR CASH CREDIT) and BASE RATE + 5.15% + 0.50 tenure premium ( for TERM LOAN) facilities. Accordingly, the plaintiff made Digitally MUKESH signed by MUKESH KUMAR a representation/letter dated 15.07.2015 to the defendant No.1 bank and KUMAR GUPTA Date:
GUPTA 2025.11.06
16:58:57
+0530 CS (Comm.) No.555/2018 Guru Nanak International Pvt. Ltd. Vs. Bank of India & Ors. Page no. 3 of 72
apprised the summary of the excess interest charged arbitrarily, illegally and without any acknowledgement to the plaintiff.
2.4) It has been specifically mentioned that at the time of initial sanction, cash credit limit had been sanctioned @ 13.75% (BPLR @10% + 3.75%) whereas the defendant No.1 bank charged interest @ 14% (BPLR + 4%) for the period 09.02.2013 which was an excess interest of Rs.17,642/- as charged by the defendant bank. Again the plaintiff had been sanctioned adhoc limit during the month of October, 2014 and as per terms of sanction, effective rate of interest on adhoc limit is 13.95% whereas the defendant No.1 bank has charged interest @ 19.25% on the adhoc limit and thereby an excess interest of Rs.39,972/- has been charged by the defendant bank.
2.5) It has also been mentioned in the letter that the defendant No.1 bank has been continuously charging additional rate of interest @ 1% or 2% in contradiction to the terms and conditions of the sanctioned rate of interest and thereby, an excess interest to the tune of Rs.12,28,834/- has been charged. Further, as against the terms of sanction in January, 2014, when an effective rate of interest on adhoc limit was granted @14.95% the defendant No.1 bank had charged interest @ 15%. Accordingly, the defendant No.1 bank has illegally charged the total interest of Rs.12,86,450/-without any justifiable reason. The plaintiff vide its letter dated 15.07.2015 requested the defendant No.1 bank to look into the matter and refund the same.
2.6) It has been further averred that the plaintiff had to pay higher rate of interest for both the credit facilities as compared to the interest in Digitally signed by MUKESH MUKESH KUMAR GUPTA the earlier years and the same was informed to the defendant No.1 bank KUMAR GUPTA Date:
2025.11.06 16:59:05 +0530 CS (Comm.) No.555/2018 Guru Nanak International Pvt. Ltd. Vs. Bank of India & Ors. Page no. 4 of 72 by sending a representation received on 20.02.20216 mentioning that it was not possible to bear heavy burden of interest and is rather illegal to frequently change the rate of interest by the defendant No.1 bank. The plaintiff has also averred to have obtained credit rating from ICRA and CRISIL for the year Financial Year 2014-15 & 2015-16 and the same had been deposited with the defendant No.1 bank, despite which the bank has arbitrarily and without any intimation to the plaintiff had charged excess interest of Rs.12,28,834/- uptil financial year ending 31.03.2015. The plaintiff has made representation and sent several reminders requesting the defendant No.1 bank to refund the excess interest so charged, however no heed has been paid by the defendants.
2.7) Further, the plaintiff vide its letters dated 18.08.2015, 11.02.2016, 25.05.2016, requested the defendants to revise rate of interest to base rate + 2.65% (for cash credit) and base rate plus 2.65% +0.50 tenure premium (for terms loan) facilities so that the effective rate of interest do not exceed 12.50% in case of cash credit limit and 13% in case of term loan and also requested the defendants to refund the excess interest. Even the Credit Manager of the bank vide e-mail dated 05.05.2016 informed higher authorities of the defendant No.1 bank that the account of the plaintiff was running satisfactorily but a penal interest @ 1% and 2% had been charged by the system since May, 2015.
2.8) The plaintiff has informed the defendants that from 01.04.2015 to 31.01.2016, the defendant No.1 bank has charged interest of Rs.12,99,167/- from the plaintiff as excess interest and demanded the refund thereof vide letter dated 25.05.2016, however, the defendant No.1 Digitally signed by MUKESH MUKESH KUMAR GUPTA bank has failed to do so.
KUMAR Date:
GUPTA 2025.11.06 16:59:14 +0530 CS (Comm.) No.555/2018 Guru Nanak International Pvt. Ltd. Vs. Bank of India & Ors. Page no. 5 of 72 2.9) Plaintiff has further written various reminders and made visits to the branch office of defendants to remind about the charging of excess penal interest to which the defendants verified the stocks statement and checked all calculation of penal interest. The defendant No.1 bank has accepted the stock statements filed on due date and found that the penal interest has been wrongly charged and thereafter, refunded the excess interest of Rs.19,81,212/- which was credited in the plaintiff's account on 28.06.2017.
2.10) As per the guidelines issued under Circular of the Reserve Bank of India, all borrowers accounts are required to be renewed within 90 days of the due date otherwise account will became NPA in the records of the bank, however, the defendant No.1 bank has failed to renew the credit limits within due dates as per the existing terms and conditions and no such renewal are provided to the plaintiff.
2.11) Again, vide letter dated 21.06.2016, the plaintiff has demanded the excess interest of Rs.27,08,943/- as charged by the defendant NO.1 bank, details thereof as under;-
S. No. YEAR/PERIOD EXCESS INTEREST
CHARGED ( in Rs.)
1. 09.02.2013 to 07.08.2014 Rs.17,642/-
2. 25.08.2013 to 31.03.2014 Rs.1,82,581/-
3. 01.04.2014 to 31.03.2015 Rs.9,90,022/-
4. 01.04.2015 to 31.03.2016 Rs.14,43,417/-
5. 01.04.2016 to 10.06.2016 Rs.75,281/-
TOTAL Rs.27,08,943/-
Digitally
signed by
MUKESH
MUKESH KUMAR
KUMAR GUPTA
Date:
GUPTA 2025.11.06
16:59:23
+0530
CS (Comm.) No.555/2018 Guru Nanak International Pvt. Ltd. Vs. Bank of India & Ors. Page no. 6 of 72 The defendant No.1 bank has failed to even refund the same to the plaintiff.
2.12) The plaintiff time and again reminded the defendants to revise rate of interest to base rate plus 2.65%( for cash credit) and base rate plus 2.65%+0.50 tenure premium (for term loan) facilities, so that the effective rate of interest does not exceed 12.50 % in case of cash credit and 13% in case of term Loan but the defendants have neither acted upon nor refunded the amount and rather charged interest of Rs.32,93,607/- on 28.06.2017 for the month of June, 2017 against the actual interest liability of Rs.13,60,487/-. Further, plaintiff has not only professionally made various visits to the defendants but also duly referred to earlier meetings, and correspondences as well as the reminders. Finally vide letter dated 22.09.2017, the plaintiff informed the defendants about all personal visits, correspondences and reminders for refund of the excess amount of interest charged and also sought an explanation. Vide said letter, plaintiff also informed the defendants about arbitrary charging of interest on 28.06.2017 for the month of June, 2017 of Rs.32,93,607/- against the actual interest liability of Rs.13,60,487/-.
2.13) When the plaintiff sent another reminder about the increase of penal interest, the defendant has given unjustified, illogical reply to the plaintiff that the rate of interest was increased since March, 2015 as:-
(a) Late submission of Renewal Data during the financial year 2015-16 totaling Rs.12,08,643/-
Digitally signed
(b) Charing of extra interest @ 0.5% per annum for
by MUKESH
MUKESH KUMAR
GUPTA
KUMAR Date:
GUPTA 2025.11.06
16:59:30
+0530
CS (Comm.) No.555/2018 Guru Nanak International Pvt. Ltd. Vs. Bank of India & Ors. Page no. 7 of 72
the period April, 2016 to September, 2016 towards premium and back dated minor calculations (exact details not made available) on estimated basis thereby totaling Rs.7,72,569/-
2.14) Plaintiff, vide its representation dated 22.09.2017, informed the defendants in details the deficiencies indulged in by defendants and also clearly apprised of the reasons for late submission of renewal data during the year financial year 2015 as renewal of working capital limits of the plaintiff which was effected at the end of the defendants vide sanction letter dated 28.03.2014 wherein concession in interest @ 1.25% per annum was given to the plaintiff. However, the defendant had again charged processing fee of Rs.1,53,000/- on 09.02.2015 debited to Cash Credit Account No. 600630110000033 of the plaintiff for renewal of Working Capital Limits by stating that the plaintiff's limits shall be shortly renewed on the existing terms and conditions by the defendant No.1 bank for next 6 months on the basis of previous year's Audited Balance Sheet as on 31.03.2014.
2.15) It has also been averred that the short renewal of limits must have been taken at Zonal office level of the defendants as limits of the plaintiff are processed at Zonal Office of the defendant for which the defendants had charged processing fee in the month of February 2015, however, neither copy of the same was ever made available to the plaintiff nor consent of the plaintiff was ever obtained and resultantly, short renewal of limits was undertaken by the Zonal office of the Digitally signed by MUKESH MUKESH KUMAR defendants at existing terms and conditions wherein interest concession GUPTA KUMAR Date:
GUPTA 2025.11.06 17:00:15 +0530 CS (Comm.) No.555/2018 Guru Nanak International Pvt. Ltd. Vs. Bank of India & Ors. Page no. 8 of 72 of 1.25% was given to the plaintiff. Therefore, charging of extra interest @ 1.25% per annum is not justified and totally unwarranted and arbitrary decision of the defendant.
2.16) The plaintiff has further averred that during the Financial Year 2015-16, the plaintiff has submitted its audited Balance Sheet in the month of August, 2015, wherein actual renewal of limit was undertaken by the defendants in the month of March, 2016 i.e. after 1 year of last renewal letter dated March, 2014. During this period, the plaintiff had paid renewal charges twice Rs.1,53,000/- on 09.02.2015 & Rs.
1,68,143/- on 09.02.2016, therefore, the delay in renewal of working capital limits is mainly at the end of the defendant and the plaintiff should not be penalized for the delay caused by the defendants since the plaintiff had paid renewal charges for two years, therefore, further penal interest for the period between August 2015 to March, 2016 was not payable by the plaintiff. Further, the rate of interest was sanctioned @ 15.10% per annum vide sanction letter dated 10.03.2016 issued by the defendants and as such charging of interest above the sanctioned rate of interest is totally unjustified and the same must be effective at the rate of earlier sanction letter issued by the defendants in March, 2014. Hence, excess interest charges by the defendants is liable to be refunded to the plaintiff with interest.
2.17) With regard to the charging of extra interest @ 0.50% per annum for the period April 2016 to September, 2016, it has been submitted that when limits of the plaintiff has already been renewed in the month of March, 2016 charging of interest prior to March, 2016 Digitally signed by MUKESH above the sanctioned rate of interest is also unjustified and should be MUKESH KUMAR KUMAR GUPTA Date:
GUPTA 2025.11.06
17:00:23
+0530
CS (Comm.) No.555/2018 Guru Nanak International Pvt. Ltd. Vs. Bank of India & Ors. Page no. 9 of 72 refunded to the plaintiff. Accordingly, the total amount which the defendants are liable to refund to the plaintiff is as under:-
Financial Year Penal Interest Interest on Total Interest Net Refund Charged Penal Interest 2013-14 2,00,224 8,291 2,08,515 2014-15 9,90,022 90,583 10,80,605 2015-16 14,43,417 1,96,618 16,40,035 2016-17 5,70,298 5,08,323 10,78,621 2017-18 12,446 33,428 45,872 Total 32,16,407 8,37,241 40,53,648 40,53,648 2.18) It has further been averred that during the last 5 years, the plaintiff has suffered a lot at the hand of the defendants and had to bear interest on the excess interest due to cheating and deficiency in service of the defendants and therefore, the defendants are also liable to refund the interest of Rs.8,37,241/- being interest on penal interest, changed excessively by the defendnats. Further, the plaintiff has received a letter darted 17.10.2017, issued by the defendants in response, to the plaintiff's letter dated 22.09.2017, which being not explanatory in nature has been again responded to by the plaintiff vide letter dated 24.12.2017. When the defendants did not refund the amount, the plaintiff was constrained to issue a legal notice dated 03.04.2018 to the Assistant General manager and Chief Manager, Bank of India, Karol Bagh, New Delhi, whereby the defendants were advised to refund the sum of Rs.40,53,648/-
within 15 days from the date of receipt of legal notice to which the defendant sent a reply dated 18.04.2018 by denying the claim of the Digitally MUKESH signed by MUKESH KUMAR plaintiff as well as the sum of Rs.40,53,648/-.
KUMAR GUPTA
GUPTA Date:
2025.11.06
17:00:30
+0530 CS (Comm.) No.555/2018 Guru Nanak International Pvt. Ltd. Vs. Bank of India & Ors. Page no. 10 of 72
2.19) Plaintiff has claimed cause of action on the date when defendants has charged the penal interest for the first time without any fault of the plaintiff, when the defendant No.1 bank credited the amount of R.19,82,212/- out of total charged penal interest after several requests and reminders of the plaintiff and finally, when the plaintiff has issued a legal notice to the defendant. Hence, the present suit for recovery of Rs.40,53,648/- with interest and costs.
(C) DEFENDANT'S CASE:-
3. On receipt of summons for settlement of issues, the defendants contested the suit by filing a detailed Written Statement thereby taking various preliminary objections viz:-
3.1) the suit is not maintainable as the suit of the plaintiff is hopelessly time barred, the suit is bad for mis-joinder and non-joinder of parties and the plaintiff has not approached the court with clean hands.
3.2) The defendants have contended that the real facts of the case are that in the year 2013, the plaintiff has requested for credit facility from the defendant No.1 bank and upon the request of the plaintiff, the defendants, vide the letters dated 15.01.2013 and 28.03.2014 offered the credit facility to the plaintiff upon certain terms & conditions by opening a Cash Credit Account no. 600630110000033 and since the plaintiff has been irregular in submission of stock statements/MSOD/QIS etc, penal interest has been charged into their account. It has further been Digitally signed by MUKESH MUKESH KUMAR GUPTA contended that the details/amount of review overdue & penal interest for KUMAR Date:
GUPTA 2025.11.06 17:00:37 +0530 CS (Comm.) No.555/2018 Guru Nanak International Pvt. Ltd. Vs. Bank of India & Ors. Page no. 11 of 72 untimely submission of stock statements/MSOD/QIS etc have been duly informed to the plaintiff & its representative who used to visit the branch of the defendant bank from time to time. The defendants have been charging the agreed floating rate of interest which varies from time to time as per RBI rules, regulations and guidelines. It has further been contended that the plaintiff is in the habit of always raising the plea of charging of exorbitant rate of interest from time to time without itself adhering to the terms and conditions of the sanction letter of credit facilities and therefore, the allegations made by the plaintiff are totally false, and baseless.
3.3.) The defendants have further averred that the plaintiff has made a request of refund of interest of Rs.32,16,407/- without any reason and the defendant has verified that the penal interest has been charged in the account of the plaintiff due to irregular submission of stock statements and after verifying the account, the interest of Rs.19,81,212/-
has been reversed on 28.06.2017 itself. The penal interest in the account of the plaintiff has been charged due to delayed submission of stock statements and chargeable for an amount of Rs.4.65 lakhs. The amount refunded in the account of the plaintiff included the amount of interest on refundable interest. The defendants have provided the entire calculations to the plaintiff's Representative Mr. Deepak Kumar who has duly verified and accepted the same, however, the plaintiff is now raising these allegations with a malafide intention to extract money from the defendants.
Digitally
signed by
MUKESH
MUKESH KUMAR
KUMAR GUPTA
Date:
GUPTA 2025.11.06
17:00:51
+0530
CS (Comm.) No.555/2018 Guru Nanak International Pvt. Ltd. Vs. Bank of India & Ors. Page no. 12 of 72 3.4) It has further been averred that in one of the communications, the plaintiff has itself admitted the fact of late submission of renewal data as well as information which resulted in delayed review of plaintiff's account almost by 11 months. The plaintiff was habitual of not submitting the same on stipulated date and time due to which the defendants were constrained to levy penal interest and hence, penal interest amounting to Rs.11,31,081/- had been charged in the account of the plaintiff by the defendants.
3.5) It has further been contended by the defendants that on receipt of the requests of plaintiff, defendants have rechecked the interest charged to the account of plaintiff from the beginning and found that less interest has been charged for certain period and as such, the defendants have recovered the same with normal interest for the month on 28.06.2017 and the amount of interest of Rs.32,93,607/- has been debited to plaintiff's account included this amount also which was duly explained to the plaintiff and now the plaintiff is leveling false and fabricated allegations for unjust enrichment.
3.6) It has further been contended that the account of the plaintiff was having external credit rating of "B" and bearing risk weight of 150% and as per the Defendants Bank's guidelines from 01.04.2016 additional interest of 0.50% as an additional risk premium for risk weight of 150% was to be charged.
Digitally
signed by
MUKESH
MUKESH KUMAR
KUMAR GUPTA
Date:
GUPTA 2025.11.06
17:01:00
+0530
CS (Comm.) No.555/2018 Guru Nanak International Pvt. Ltd. Vs. Bank of India & Ors. Page no. 13 of 72
3.7) It has been admitted by the defendants that the plaintiff made a request of refund of interest of Rs.32,16,407/-, however, the same has been without any reason and the defendants verified the penal interest charged in the account of plaintiff due to non-submission of stock statement timely and after verifying the account and reversed the interest of Rs.19,81,212/- on 28.06.2017 itself.
3.8) It is further the case of the defendants that the defendant No.1 bank has advised plaintiff that due to late submission of Renewal Data for the FY 2015-16 for Rs.11,31,081/- the penal interest was charged and the defendant no.1 bank has advised the plaintiff that due to extra charging of 0.50% per annum for premium for external credit rating between April 2016 to September 2016 and back dated minor calculations on estimate basis, a total of Rs.7,72,569/- is chargeable as on 28.06.2017. It has also been contended that on renewal of account, Rate of interest of 15.10% per annum without concession was sanctioned and thus, interest from the last date of earlier sanction has been charged and the additional 0.50% was levied from plaintiff due to external rating 'B' and the same is justified.
3.9) The defendants have reiterated that defendant No.1 bank has replied to legal notice dated 03.04.2018 on 18.04.2018. It has further been averred that there is no liability of the defendants to pay claimed amount of Rs.40,53,648/- or any interest thereupon as no amount is due against the defendants and prayed that the suit be dismissed with costs.
Digitally signedMUKESH by MUKESH KUMAR GUPTA KUMAR Date:
GUPTA 2025.11.06 17:01:09 +0530 CS (Comm.) No.555/2018 Guru Nanak International Pvt. Ltd. Vs. Bank of India & Ors. Page no. 14 of 72
4. A detailed replication to the Written Statement was also preferred by the plaintiff reiterating the contents of the plaint and vehemently denying the contents of the Written Statement. However, the plaintiff has averred that it has been submitting its stock statements/MSOD/QIS etc. on time and the defendants have never informed the plaintiff about the changes in rate of interest as per the RBI guidelines. The plaintiff has finally reiterated its prayer.
(D) CRYSTALISING THE CONTEST :-
5. On the pleadings of the parties and documents placed on record and after perusing the affidavit of admission denial of the parties and hearing Ld. Counsels for the parties, the following issues were framed for adjudication vide order dated 12.12.2019.
ISSUES.
(1) Whether the suit is barred by Law of Limitation ? OPD (2) Whether the plaintiff is entitled to the amount as claimed for ?OPP (3) Whether the plaintiff is entitled to the interest, if so, at what rate and for which period ?OPP (4) Relief.
Digitally signed by MUKESH MUKESH KUMAR KUMAR GUPTA GUPTA Date:
2025.11.06 (E) EVIDENCE OF PLAINTIFF.
17:01:26
6. Plaintiff, in support of her case, got examined only one witness as +0530 PW1, Shri Tarsem Lal Batra, Director of the plaintiff company who has reiterated the contents of the plaint on oath in her affidavit Ex.PW1/A. He got exhibited the following documents.
CS (Comm.) No.555/2018 Guru Nanak International Pvt. Ltd. Vs. Bank of India & Ors. Page no. 15 of 72
Sr. Particulars Exhibits
No.
1. Memorandum of Article of Ex.PW1/1(colly)
Association of the plaintiff of
the company
2. Board Resolution and Ex.PW1/2(colly)
Authorization Letter
3. Sanction Letter dated Ex.PW1/3(colly)
15.01.2013
4. Sanction Letters dated Ex.PW1/4(colly)
28.03.2013
5. Sanction Letter dated Ex.PW1/5 (colly)
10.03.2016
6. Letter dated 17.10.2016 Ex.PW1/6
7. Daily Bank Interest Sheet Ex.PW1/7 (colly) and
statement dated 15.07.2013 to Ex.PW1/8(colly)
10.06.2016 and Daily bank
Interest sheet after surrender of
CC limit dated 09.02.2013 to
30.06.2017 provided by the
bank
8. Credit Rating from the ICRA Ex.PW1/9(colly)
and CRISIL obtained as per the
advised of the defendant bank
during the Financial Year 2014-
15
9. Copy of the letter dated Ex.PW1/10(colly)
11.02.2015
10. Copy of letter dated 15.07.2015 Ex.PW1/11(colly)
11. Copy of letter dated 25.05.2016 Ex.PW1/12
12. Copy of letter dated 18.08.2015 Ex.PW1/13
13. Copy of letter dated 11.02.2016 Ex.PW1/14(colly)
14. Copy of letter dated 21.06.2016 Ex.PW1/15(colly)
15. Copy of the e-mail dated Ex.PW1/16
05.05.2016
16. Bank has provided Bank System Ex.PW1/17(colly)
Print Sheet of the plaintiff
MUKESH by
Digitally signed
MUKESH
KUMAR GUPTA
account regarding total interest
KUMAR Date:
2025.11.06
GUPTA 17:01:36
+0530
CS (Comm.) No.555/2018 Guru Nanak International Pvt. Ltd. Vs. Bank of India & Ors. Page no. 16 of 72
charged and Interest Rate
Charged Sheet
17. Statement of Account dated Ex.PW1/18(colly)
28.06.2017
18. Record of the Bank Interest & Ex.PW1/19(colly)
Interest on penal interest
summary Financial year 2013-
14
19. Copy of letter dated 22.09.2017 Ex.PW1/20(colly)
20. The copy of letter/reply of the Ex.PW1/21
defendant bank dated
17.10.2017
21. The copy of the letter alongwith Ex.PW1/22(colly)
the proof of service
22. Copy of letter/reply dated Ex.PW1/23
01.02.2018 of the defendant
bank
23. Copy of legal notice alongwith Ex.PW1/24(colly)
proof of receipt
24. Copy of reply of the counsel of Ex.PW1/25(colly)
defendant
25. Bank has provided account Ex.PW1/26(colly)
statement of the bank clarifying
the sudden increase of the
interest rate for the period
01.05.2016 to 30.04.2017 and
the copy of same
26. Copy of Statement of account Ex.PW1/27(colly)
showing deduction of
processing fee for the period
01.02.2015 to 28.02.2015
27. Ledger Account of the plaintiff Ex.PW1/28(colly)
company maintained during the
course of business for the period
01.04.2014 to 10.05.2017
28. The certificate of genuineness Ex.PW1/29
of the interest calculation sheet
Digitally
signed by
maintained as per section 65-B
of the Indian Evidence Act
MUKESH
MUKESH KUMAR
KUMAR GUPTA
GUPTA Date:
2025.11.06
17:01:45
+0530
CS (Comm.) No.555/2018 Guru Nanak International Pvt. Ltd. Vs. Bank of India & Ors. Page no. 17 of 72
29. Copy of Notice u/O XII rule 8 Ex.PW1/30(colly) CPC alongwith receipts and tracking record He has deposed that the defendant has no right to withhold/deny the refund of Rs.40,53,648/- of the plaintiff without any cause as the same amounts to wrongful loss to the plaintiff and wrongful gain to the defendant for which defendant bank is liable to pay the suit amount to the plaintiff.
7. During cross-examination, Ld. Counsel for defendants has tried to puncture the testimony of PW1 on various aspects viz. liability of the defendants to the suit amount claimed, the acceptance of terms and conditions of the sanctioned letters, the charing of penal interest at agreed rate and the default of the plaintiff in submission of stock statements, late submission of renewal data and delayed review of the accounts besides low external credit rating leading to charging of additional risk premium bearing risk weight. PW1 during cross-examination, has admitted that he has received the sanctioned letter dated 10.03.2016 part of Ex.PW1/5 (colly). He has also admitted that the plaintiff has duly accepted the terms and conditions mentioned in the annexure and proposal. He has also admitted that sanctioned limit was 11.50 (Crore) with pricing 5.40% OBR which at present is 15.10% per annum with monthly rests, however, adding voluntarily that the entire document is required to be read for correct interpretation. He has also admitted that as per the terms of the Digitally signed agreement, the term loan sanctioned limit was 0.77 (crore) with pricing by MUKESH MUKESH KUMAR GUPTA KUMAR GUPTA Date:
2025.11.06 17:01:53 (ROI) @ 5.40 % above base rate plus tenure premium 0.50% presently +0530 CS (Comm.) No.555/2018 Guru Nanak International Pvt. Ltd. Vs. Bank of India & Ors. Page no. 18 of 72 15.60% per annum with monthly rests, repeating its contention of correct interpretation. He has denied the suggestion that the bank has deducted the interest on penal rate not agreed upon and it was not based on terms and conditions. He has also denied the suggestion that the bank has charged penal interest at the agreed rate, voluntarily adding that defendants have charged at wrong terms. He has also denied the suggestion that the bank has charged interest as per terms and conditions mentioned of letter dated 10.03.2016 and he has committed any default of any terms and conditions of para No.12 of the said agreement or that the penal interest has been charged due to any such default on his part.
He has also denied the suggestion that he has been irregular in submission of stock statement to the bank or that the bank has rightly deducted the amount as per guidelines of Reserve Bank of India. He has also admitted that the bank considered his representation and refunded Rs.19,81,212/- on 28.06.2017, denying the suggestion that his representative Mr. Deepak Kumar on his behalf verified all these things and accepting that he had no grievances against the bank. He has also denied the suggestion that he has made any communication to the bank admitting late submission of renewal data and information and delay of 11 months voluntarily adding there was no such admission on his part nor any such document exists. He has also denied the suggestion that penal interest amounting to Rs.11,31,081/- was charged in his account due to delayed review of account and late submission of information. He has also denied the suggestion that as he was having external credit rating of 'B" and bearing risk weight of 150% therefore, 0.50% additional risk Digitally signed by MUKESH premium was charged.
MUKESH KUMAR
KUMAR GUPTA
GUPTA Date:
2025.11.06
17:02:03 CS (Comm.) No.555/2018 Guru Nanak International Pvt. Ltd. Vs. Bank of India & Ors. Page no. 19 of 72
+0530
8. Though, the plaintiff has mentioned the name of two other witnesses namely Parminder Dev Sharma and Shri Deepak Sharma in its list of witnesses however, vide statement dated 05.01.2023 the plaintiff closed the evidence by stating that he does not want to examine the aforesaid two witnesses.
(F) DEFENDANT'S EVIDENCE :-
9. The defendants in their defence also examined only one witness, its Chief Manager Ms. Nikki Tyagi, as DW1 who in her evidence by way of affidavit Ex.DW1/A, reiterated the contents of the Written Statement on oath. She got exhibited the Authority Letter dated 02.03.2023 in her favour as Ex.DW1/1. She has deposed that the plaintiff was irregular in submission of stock statements/MSOD/QIS etc. for which penal interest has been charged into its account. She has also deposed that that details and amount of review overdue and penal interest for untimely submission of the stock statement/MSOD/QIS was duly informed to the representative of the plaintiff visiting the branch of the defendants from time to time and also the defendant No.1 bank has been charging the agreed floating rate of interest as varied from time to time as per RBI Rules, Regulations and Guidelines. She has further deposed that the plaintiff himself in one of the communications itself admitted the factum of late submission of renewal data and information which resulted in delayed review of plaintiff's account almost 11 months. She has also deposed that the renewal of account rate of interest is of 15.10% per annum without concession was sanctioned and thus interest from the last Digitally signed by MUKESH MUKESH KUMAR KUMAR GUPTA Date:
date of earlier sanctioned was charged. The additional 0.50% was levied GUPTA 2025.11.06 17:02:30 +0530 CS (Comm.) No.555/2018 Guru Nanak International Pvt. Ltd. Vs. Bank of India & Ors. Page no. 20 of 72 from plaintiff due to external rating 'B' and is justified. She has further deposed that though the plaintiff made a request for refund of interest of Rs.32,16,407/- without any reason, the defendant verified the entire statement of interest charged and after verifying the same reversed the interest to the tune of Rs.19,81,212/- on 28.06.2017 itself.
10. The witness DW1 was subjected to cross-examination at length by Ld. Counsel for the plaintiff. During cross-examination, DW1 has admitted that she has neither filed any guidelines of RBI nor its clauses pertaining to dispute in question. She also admitted that all the bank records and accounts are being assessed and audited by the Auditor specially appointed for the purpose of the bank account. She has also admitted that the Auditor reviews all the files, again stating that due to paucity of time, the auditor does not review all still hastily adding that the Auditor as per guidelines of RBI now review only 50% of the files instead of 75% files as per the earlier guidelines. She has admitted that generally bank issues the notice to its customers with respect to levy/charging of interest, penal interest, and any other interest. She has denied the suggestion that the plaintiff has submitted regular stocks statements in time. She was not sure whether bank has given any interest on wrongly charged penal interest without checking the records. She has further deposed that she cannot say anything about the e-mail dated 05.05.2016 Ex.PW1/16 filed by the plaintiff and whether the said e-mail has been sent to the Head Office of the bank on said date at 15:26 hours stating the said e-mail is unavailable in the bank record being an old Digitally signed record. She has deposed that she does not know whether any response MUKESH by MUKESH KUMAR GUPTA KUMAR Date:
2025.11.06 GUPTA 17:02:40 +0530 CS (Comm.) No.555/2018 Guru Nanak International Pvt. Ltd. Vs. Bank of India & Ors. Page no. 21 of 72 was received from the Head Office to the said e-mail. She has clearly deposed that the computer systems of the bank are not accessible to the customers and print out of any e-mail or other records from the bank computers of the bank cannot be taken by customers. She has admitted that the internal and external audit report of the bank is prepared every year. DW1 has denied the suggestion that the calculation sheet of interest part of cash credit account is prepared immediately at the time of opening of account, however, admitted the rate of interest as charged by the bank as per the sanctioned term. She has further deposed that the authorised officer feeds the rate of interest in the C/C account when the account is opened. The witness has admitted that audit of plaintiff C/C account has been conducted by the auditor every year and the renewal report of the same is prepared every year. She has admitted that the customers are duly informed in case of any negative report regarding non-payment of interest or other charges by the customer as also the change of rate of interest or any charges of previous years. She has admitted that whenever the rate of interest or any charges of previous years is charged from the customer they inform the customer. She has admitted that as per document Ex.PW1/7 (colly) i.e. detail interest report, penal interest @ 1% & 2% on different days has been charged from 2014 to 2016. Similarly, admitting that the as per Ex.PW1/8 (colly) penal interest @ 1% & 2% on different days has been charged from 2013 to 2017 from opening date of closing date. She has also admitted that on 28.06.2017 the penal interest of Rs.19,81,212/- was reversed in the account of the plaintiff. While admitting that the defendant bank has not given any negative report to the Digitally signed by Kotak Mahindra Bank where the credit facilities was shifted by the MUKESH MUKESH KUMAR KUMAR GUPTA Date:
GUPTA 2025.11.06
17:02:48
CS (Comm.) No.555/2018 Guru Nanak International Pvt. Ltd. Vs. Bank of India & Ors. Page no. 22 of 72 +0530 plaintiff, she has denied that plaintiff has suffered any financial losses on account of wrong charging of penal interest. Finally she has brought the printout of e-mail dated 05.05.2026 and got exhibited the copy thereof on record as Ex.PW1/PA.
11. No other witness was examined by the defendants and the evidence of the defendants was closed vide statement dated 08.08.2023.
(G) ARGUMENTS ADDRESSED:-
ARGUMENTS OF PLAINTIFF.
12. Ld. Counsel for the plaintiff Ms. Sonia Sharma has vehemently argued that the plaintiff has proved its case in all aspects by oral as well as documentary evidence. It has been argued that in the year 2013, the plaintiff has been granted Cash Credit & Term Loan Facilities by the defendant No.1 bank vide letters dated 15.01.2013 and 28.03.2014 at lower rates of interest, subject to terms and conditions, which have been subsequently increased by the defendant No.1 bank without any prior intimation of change of terms and conditions arbitrarily. Further, the defendant No.1 bank has failed to clarify as to whether the terms and conditions of the sanctioned letters are in consonance of RBI Guidelines or their own terms and conditions. Ld. Counsel has further argued that the plaintiff has written various letters dated 11.02.2015, 15.07.2015, 18.08.2015, 11.02.2016, 25.05.2016 and 21.06.2016 complaining about charging of excess and penal interest, however, no heed has been paid by MUKESH Digitally signed by MUKESH the defendants to these communications. Ld. Counsel has further argued KUMAR KUMAR GUPTA GUPTA Date:
2025.11.06 17:02:55 that the aforesaid letters have been admitted by the defendants and a total +0530 CS (Comm.) No.555/2018 Guru Nanak International Pvt. Ltd. Vs. Bank of India & Ors. Page no. 23 of 72 amount of Rs.40,53,648/- has been charged as excess and penal interest till 30.06.2017. Ld. Counsel for the plaintiff has also argued that the defendants have also admitted the Detailed Interest Report of the account of plaintiff filed on record which clearly shows charging of penal interest @ 1% and 2% during the period 09.02.2013 to 30.06.2017 despite timely payment of interest on the availed facilities by the plaintiff. Even, Ms. Nikki Tyagi, the chief manager of the defendant bank, during her cross- examination, has admitted that the penal interest of 1% and 2% have been charged on different days for the period 2013-17. It has been further argued that the Statement of Account of the defendant No.1 bank shows that the defendant No.1 bank used to charge penal interest in the morning and reversed the same in part in the evening. Ld. Counsel has further argued that the Credit Manager of defendant No.1 bank has written an e- mail dated 05.05.2016 to their Headquarter mentioning therein that the plaintiff's account has been running satisfactory, however, penal interest of 1% and 2% have been charged by the Computer System since May, 2015 and the bank cannot access the problem of applying the aforesaid penal interest by the system. Ld. Counsel has further vehemently argued that the bank has returned Rs.19,81,212/- to the plaintiff on 28.06.2017 which amounts to an admission of mistake by the defendant bank in charging of penal interest @ 1% or 2% despite satisfactory running of plaintiff's account. Ld. Counsel has further vehemently argued that the plaintiff has in compliance of Sanction Letter dated 28.03.2014 submitted its audited balance sheet for the Financial Year, 2014-15 in August, 2015 but actual limits of renewal has been undertaken in March, 2016 by the Digitally signed by MUKESH MUKESH KUMAR GUPTA bank and due to which the plaintiff had to even pay two renewal charges KUMAR GUPTA Date:
2025.11.06 17:03:04 +0530 CS (Comm.) No.555/2018 Guru Nanak International Pvt. Ltd. Vs. Bank of India & Ors. Page no. 24 of 72 to the tune of Rs.1,53,000/- on 09.02.2015 and Rs.1,68,143/- on 09.02.2016. In response to the objection of the defendant No.1 bank that plaintiff bank has not filed the stock statements/MSOD/QIS etc. in time, Ld. Counsel has argued that the the cheque Ex.PW1/9 towards payment to ICRA Ltd. for carrying out SME rating (ICRA & CRISIL) alongwith the customer's letter clearly show that the account has been timely rated.
Further, as per clause 12 of the Terms and Conditions of Sanction Letter dated 28.03.2014 the company has to supply Audited Financial Statement (AFS) within 6 months from the date of closure of financial year and the plaintiff in compliance thereof has submitted the same in August, 2015 which is well within the said period of 6 months and therefore, there is no delay in submitting the AFS. Ld. Counsel has vehemently added that as per the RBI guidelines, if there is a late renewal of account or if the account is not renewed within 90 days of due date of renewal the accounts are declared Non-Performance Assets (NPA), however, the same has never been declared in case of plaintiff so which clearly proves that the plaintiff has never been at fault in submission of the AFS.
13. On the point of limitation, Ld. Counsel while relying upon M/s Shakti Bhog Food Industries Ltd. Vs. The Central Bank of India (AIR 2020 SC 2721: 2020 INSC 413) and Residuary Article 113 of the Schedule annexed to the Limitation Act, 1963, has argued that since the letter dated 17.10.2017 has been sent by the defendant bank to the plaintiff confirming the receiving of letter of plaintiff dated 22.09.2017, the cause of action has arisen on 17.10.2017 being the date when the Digitally signed by MUKESH KUMAR MUKESH KUMAR GUPTA defendant has for the first time denied the claim of the plaintiff. Date:
GUPTA 2025.11.06
17:03:12
+0530
CS (Comm.) No.555/2018 Guru Nanak International Pvt. Ltd. Vs. Bank of India & Ors. Page no. 25 of 72
14. With regard to the plea of defendants that the the present suit is not maintainable due to lack of compliance of the Commercial Courts Act, 2015 as there is no Pre-Institution Mediation Settlement (PIMS) adopted by the plaintiff, Ld. Counsel has argued that vide order dated 05.12.2018, the court has referred the present matter to DLSA for PIMS for 24.12.2018 wherein the matter was not settled and summons for settlement of issues were issued on 11.02.2019 and therefore, the plea of the defendants should not considered by the court. Ld. Counsel has finally prayed for decreeing the suit.
ARGUMENTS OF DEFENDANT:
15. Ld. Counsel for the defendants Shri Jaspreet Singh on the other hand has vehemently argued that the court lacks jurisdiction to adjudicate upon the suit of the plaintiff as the same is barred by Section 21A of the Banking Regulation Act, 1949, which provides that a transaction between a Banking Company and its debtor shall not be reopened by the Court on the ground that the rate of interest charged by the Banking Company in respect of such transaction is excessive. Further, where the charging excess interest charged does not exceed the rate of interest as determined by the RBI guidelines, it cannot be challenged in the court of law, which relying upon the pronouncement of law in Corporation Bank Vs. D.S. Gowda and Ors. MANU/SC/0788/1994). It has been further argued that the suit of the plaintiff is barred by limitation as the plaintiff is claiming outstanding amount qua the excess interest charged by the defendant Digitally No.1 bank since February, 2013 whereas the present suit is filed in signed by MUKESH MUKESH KUMAR KUMAR GUPTA Date:
December, 2018. The first communication in this regard has been given GUPTA 2025.11.06 17:03:20 +0530 CS (Comm.) No.555/2018 Guru Nanak International Pvt. Ltd. Vs. Bank of India & Ors. Page no. 26 of 72 on 11.02.2015 and as such the plaintiff has not filed the suit within the prescribed limitation of 3 years from the date of cause of action i.e. 09.02.2013 and as such the suit is liable to dismissed. He has also relied upon State of Gujrat Vs. Kothari and Associates MANU/SC/1207/2015 and Satya Narayan Sharma Vs. Union Bank of India MANU/DE/7641/2023). Ld. Counsel has further argued that the plaintiff has failed to comply with section 12A of the Commercial Courts Act, 2015 by not adopting PIMS and the same goes to the root of the matter due to which the present suit is not maintainable in the eyes of law. Ld. Counsel has further argued that Cash Credit and Term Loan Facilities have been granted to the plaintiff on floating rate of interest as per the Base Lending Rate of the RBI and the plaintiff has agreed to the same by accepting, signing and stamping the sanction letters dated 15.01.2013, 28.03.2014 and 10.03.2016. While relying upon Rajesh Monga Vs. HDFC Limited and Ors. (2024) 3 CLJ 306 SC, Ld. Counsel has argued that since the plaintiff has already agreed the terms and conditions and interests have been charged by the bank as per the RBI guidelines, the plaintiff cannot subsequently raise the plea of charging excess or penal interest. Further, the representative of the plaintiff namely Shri Deepak Kumar used to look after the account of the plaintiff on day-to-day basis and he had never raised any objections about the charging of any excess or penal interest. Ld. Counsel has further argued that the plaintiff has failed to provide the stock statement/MSOD/QIS data and credit ratings within the stipulated time Digitally MUKESH signed by MUKESH KUMAR due to which the 3rd sanction letter was issued on 10.03.2016 instead of KUMAR GUPTA Date:
GUPTA 2025.11.06
17:03:34
+0530
March, 2015 and interest applied as per terms and conditions. It has been CS (Comm.) No.555/2018 Guru Nanak International Pvt. Ltd. Vs. Bank of India & Ors. Page no. 27 of 72 further argued that since the Credit Ratings of the plaintiff's account being 'B', the risk of recovery was increased due to which higher penal interest has been charged by the defendant No.1 bank. Questioning the adminissibility of ICRA and CRISIL credit ratings Ex.PW1/9 (colly) in the eyes of law, Ld. Counsel has submitted that the said ratings have not been proved by the plaintiff by calling any expert or technical witness.
Ld. Counsel has further argued that since the plaintiff has failed to bring any document on record to show compliance of Clauses 41 to 48 of the Sanction letter dated 10.03.2016 it is liable to pay penalty to the defendant No.1 bank. It has been further argued that in letters dated 11.02.2015 and 21.06.2016, the plaintiff has also failed to provide the details as to how the amount stated therein has been arrived at, and in any case, the letter is not signed by the witness who has deposed in the witness box. It has been argued that the plaintiff has also failed to provide any basis, reason or justification for refund of the excess interest from 09.02.2013 to 10.06.2016 and as per Certificate u/s 65-B, Shri Deepak Sharma who has made the said calculation, has not been deliberately examined by the plaintiff. Ld. Counsel has further argued that the e-mail dated 05.05.2016, relied upon by the plaintiff, neither confirms charging of excess interest nor levying of the same for the aforesaid period by the defendant bank. Further, it is the plaintiff who has failed to comply with its obligations of submitting documents for renewal of the limit and therefore, the bank is well within its right to charge penal interest. Ld. Counsel has further argued that the defendant bank, for maintaining good relations with the plaintiff, has returned a sum of Rs.19,81,212/- on Digitally signed by MUKESH MUKESH KUMAR KUMAR GUPTA Date:
28.06.2017 but subsequently, the plaintiff has malafidely changed its GUPTA 2025.11.06 17:03:43 +0530 CS (Comm.) No.555/2018 Guru Nanak International Pvt. Ltd. Vs. Bank of India & Ors. Page no. 28 of 72 claim to Rs.40,53,648/- being excess interest charged in last 5 years vide its letter dated 22.09.2017 without adjusting the aforesaid amount so returned. It has been further argued that the plaintiff has failed to file complete documents in its possession as required under Order XI of the Commercial Courts Act, 2015 which is evident from the fact that had the plaintiff filed all the documents or calculation sheet as referred to and annexed with the letters in time to the defendant bank, the same should have been placed on record. Ld. counsel has further argued that the ledger account Ex.PW1/28 is not proved in accordance with law as same is not supported by the affidavit u/O XI Rule 1 (vi) CPC or Certificate u/s 65-B of the Indian Evidence Act, 1872. Further the certificate u/s 65-B of the Indian Evidence Act, cannot be read or considered in evidence as the signatory thereto, Mr. Deepak Sharma, has not been examined by the plaintiff. He has relied upon Samsung India Electronics Private Limited Vs. MGR Enterprises and Ors. MANU/DE/1979/2019. He has finally argued that the suit is liable to be dismissed with exemplary costs.
(H) ANALYSIS & DETERMINATION:-
16. I have heard the lengthy & vehement arguments addressed by the Ld. Counsels for the parties, perused the entire record including the oral as well as documentary evidence and have duly considered the same. My issues-wise determination are as under:-
ISSUE No.1: "Whether the suit is barred by Law of Limitation ? OPD Digitally signed by MUKESH MUKESH KUMAR GUPTA KUMAR Date: 17. The onus of proving this issue was held upon the defendants who GUPTA 2025.11.06 17:03:53 +0530 CS (Comm.) No.555/2018 Guru Nanak International Pvt. Ltd. Vs. Bank of India & Ors. Page no. 29 of 72 has taken a preliminary objection in the Written Statement that the suit is hopelessly barred by law of limitation. However, the defendants have failed to explain the same or lead any specific evidence on this issue. Since the issue of limitation is a mixed question of law and facts, the court is required to determine the same for the purpose of deciding the entitlement of plaintiff to the relief claimed otherwise also. As per Section 3 of the Limitation Act, 1963, (hereinafter referred to as the Act), any suit, application or appeal has to be filed within the period of limitation as prescribed under the schedule annexed to the Act and subject to provisions contained in Section 4 to 24 of the Act, irrespective of the fact whether limitation has been set up as a defence or not. It is a settled proposition of law that law of limitation is a law of repose, peace and justice which bars the remedy after the lapse of particular period by way of public policy and expediency. Further, it is obligatory on the part of the court to dismiss a suit or appeal if the same is made after the prescribed period, even though limitation is not set up as a defence or there is no plea regarding issue of limitation. Reliance is placed on (2011) 3 SCC 436 State of Orissa Vs. Mamta Mohanty.
18. It may be seen that the present suit is for recovery of alleged excess interest charged on Cash Credit Account and term loan account facility as well as penal interest charged thereon by the defendants. The instant suit being not covered in any of the Articles specified in the schedule annexed to the Act, the Court has to advert to the Residuary article 113 of the Schedule annexed to the Act, according to which the Digitally signed MUKESH by MUKESH KUMAR GUPTA period of limitation to institute any suit for which no period of limitation KUMAR Date:
GUPTA 2025.11.06
17:04:01
+0530
CS (Comm.) No.555/2018 Guru Nanak International Pvt. Ltd. Vs. Bank of India & Ors. Page no. 30 of 72 is provided elsewhere in the Schedule is 3 years from the date when the right to sue accrues. The Hon'ble Supreme Court in State of Punjab and Ors. Vs. Gurdev Singh (1991) 4 SCC 1: AIR 1991 SC 2219 has succinctly held that according to the third column in Article 113, time period commences to run when the right to sue accrues. Now the expression "right to sue" ordinarily means the right to seek relief by means of legal proceedings for enforcement of a legal right. This right to sue accrues only when the cause of action arises i.e. the right to initiate legal proceedings to obtain relief against any encroachment of right.
19. According to Blackwell dictionary, cause of action means a set of facts that creates a valid legal claim that can be grounds for a law suit.
The Hon'ble Supreme Court of India has described cause of action as:.
"The cause of action means a bundle of material facts which it is necessary for the plaintiff to prove in order to get relief in the suit. [2024] 5 S.C.R. 404: 2024 INSC 333 Arcadia Shipping Ltd. V. Tata Steel Limited and Others."
20. In the instant case, the plaintiff has availed Cash Credit and Term Loan Facilities from defendant No.1 bank and the defendant bank has allegedly charged excess interest as well as penal interests of 1% and 2% thereon in contravention of the terms and conditions of the sanctioned rate of interest. The plaintiff has written various letters/representations Ex.PW1/10(colly) to Ex.PW1/15(colly) and Ex.PW1/20(colly) for the same to the defendants and upon verifying the accounts of the plaintiff in respect of interests charged, the defendants Digitally MUKESH signed by MUKESH KUMAR No.1 bank has also reversed an interest of Rs.19,81,212/- on 28.06.2017.
KUMAR GUPTA
Date:
GUPTA 2025.11.06
17:04:09
+0530
CS (Comm.) No.555/2018 Guru Nanak International Pvt. Ltd. Vs. Bank of India & Ors. Page no. 31 of 72
The defendants vide the letter dated 17.10.2017, Ex.PW1/21 have
informed the plaintiff that due to irregularities in submission of stock statements/MSOD/QIS etc. the penal interest has been charged on the account and has firmly denied the claimed interest of Rs. 32,16,407/- as claimed by the plaintiff vide its letter dated 22.09.2017 Ex.PW1/20(colly). Since the plaintiff could not get any redressal from the defendant despite issuance of continuous letters, it has filed the instant suit for recovery of the claimed amount on 04.12.2018, after issuance of legal notice dated 03.04.2018 Ex.PW1/24 (colly). As already discussed, the case of the plaintiff is not covered within any Article of the Schedule annexed to the Limitation Act and as such, Article 113 which provides for residuary limitation period of three years shall be applicable.
21. In a recent pronouncement R.K. Goel Abhey Kumar Jain Vs. Municipal Corporation of Delhi, RFA (COMM) 424/2024 (D.O.D:
14.07.2025), our Hon'ble High Court while dealing with Article 113 of the Act, has held that:-
"37. Under Article 113 of the Limitation Act, time commences to run when the right to sue accrues. The expression "when the right to sue accrues"in Article 113 of the Limitation Act, the same need not always mean "when the right to sue first accrues". For the right to sue to accrue, the right sought to be vindicated in the suit should have already come into existence and there should be an infringement of it or at least a serious threat to infringe the same. Thus, the right to sue under Article Digitally signed MUKESH by MUKESH KUMAR GUPTA 113 of the Limitation Act accrues when there is an accrual of KUMAR Date:
GUPTA 2025.11.06
17:04:18
+0530
CS (Comm.) No.555/2018 Guru Nanak International Pvt. Ltd. Vs. Bank of India & Ors. Page no. 32 of 72
rights asserted in the suit and an unequivocal threat by the defendant to infringe the right asserted by the plaintiff in the suit. Thus, "right to sue"means the right to seek relief by means of legal procedure when the person suing has a substantive and exclusive right to the claim asserted by him and there is an invasion of it or a threat of invasion. The use of the phrase "right to sue"is synonymous with the phrase "cause of action"and would be in consonance when one uses the word "arises"or "accrues" with it."
(emphasis supplied)
22. The Hon'ble Supreme Court in M/s Shakti Bhog Food Industries Ltd. Vs. The Central Bank of India (supra) has also observed that :-
9. The expression used in Article 113 of the 1963 Act is "when the right to sue accrues", which is markedly distinct from the expression used in other Articles in First Division of the Schedule dealing with suits, which unambiguously refer to the happening of a specified event. Whereas, Article 113 being a residuary clause and which has been invoked by all the three Courts in this case, does not specify happening of particular event as such, but merely refers to the accrual of cause of action on the basis of which the right to sue would accrue.
10. Concededly, the expression used in Article 113 is distinct from the expressions used in other Articles in the First Division dealing with suits such as Article 58 (when Digitally signed the right to sue "first" accrues), Article 59 (when the facts by MUKESH MUKESH KUMAR GUPTA entitling the plaintiff to have the instrument or decree KUMAR Date:
GUPTA 2025.11.06
17:04:26
+0530
CS (Comm.) No.555/2018 Guru Nanak International Pvt. Ltd. Vs. Bank of India & Ors. Page no. 33 of 72
cancelled or set aside or the contract rescinded "first"
become known to him) and Article 104 (when the plaintiff is "first" refused the enjoyment of the right). The view taken by the trial Court, which commended to the first appellate Court and the High Court in second appeal, would inevitably entail in reading the expression in Article 113 as
- when the right to sue (first) accrues. This would be re- writing of that provision and doing violence to the legislative intent. We must assume that the Parliament was conscious of the distinction between the provisions referred to above and had advisedly used generic expression "when the right to sue accrues" in Article 113 of the 1963 Act. Inasmuch as, it would also cover cases falling under Section 22 of the 1963 Act, to wit, continuing breaches and torts. (emphasis supplied)
23. The Hon'ble Court has referred the dictum of a three Judge Bench in Union of India & Ors. Vs. West Coast Paper Mills Ltd. & Anr. (2004) 2 SCC 747, which has had an occasion to examine the expression used in Article 58 in contradistinction to Article 113 of the 1963 Act. Paragraphs 19 to 21 of the said decision lays down :
"19. Articles 58 and 113 of the Limitation Act read thus:
Article Description of suit Period Time from which No. of period begins to run limitation 58 To obtain any Three When the right to other declaration. years sue first accrues.
Digitally signed by MUKESH *** *** *** *** MUKESH KUMAR KUMAR GUPTA GUPTA Date:
2025.11.06 17:04:34 +0530 CS (Comm.) No.555/2018 Guru Nanak International Pvt. Ltd. Vs. Bank of India & Ors. Page no. 34 of 72 113 Any suit for whic Three When the right to h no period of years sue accrues.
limitation is
provided elsewher
e in this Schedule.
20. XXX
21. A distinction furthermore, which is required to be noticed is that whereas in terms of Article 58 the period of three years is to be counted from the date when "the right to sue first accrues", in terms of Article 113 thereof, the period of limitation would be counted from the date "when the right to sue accrues". The distinction between Article 58 and Article 113 is, thus, apparent inasmuch as the right to sue may accrue to a suitor in a given case at different point of time and, thus, whereas in terms of Article 58 the period of limitation would be reckoned from the date on which the cause of action arose first, in the latter the period of limitation would be differently computed depending upon the last day when the cause of action therefore arose." (emphasis supplied)
24. The Hon'ble Apex Court in West Coast case (supra) has finally held that the right to sue accrued to the appellant on receiving letter from the Senior Manager, dated 08.05.2002, and in particular letter dated 19.09.2002, and again on firm refusal by the respondents vide Advocate's letter dated 23.12.2003 in response to the legal notice sent by the Digitally appellant on 28.11.2003; and once again on the follow up legal notice on signed by MUKESH MUKESH KUMAR GUPTA KUMAR GUPTA Date:
7.1.2005, the plaint filed in February, 2005 would be well within 2025.11.06 17:04:43 +0530 CS (Comm.) No.555/2018 Guru Nanak International Pvt. Ltd. Vs. Bank of India & Ors. Page no. 35 of 72 limitation. Considering the former events of firm response by the respondents on 8.5.2002 and in particular, 19.9.2002, the correspondence ensued thereafter including the two legal notices sent by the appellant, even if disregarded, the plaint/suit filed on 23.2.2005 would be within limitation in terms of Article 113.
25. The crux of the aforesaid settled law laid down by the Hon'ble superior courts is laying down the clear distinction between a fixed cause of action and a continuing one and covering the cases where the accrual of right to sue for the first time does not necessarily ignites the commencement of limitation. The accrual of the right to sue, for the purpose of determining the period of limitation under Article 113 of the Act, in contradiction to the first division of the schedule of the Act, does not necessarily arise when the right to sue first accrues and rather it arises where there is a clear and unequivocal threat of infringement of a legal right of the plaintiff. Therefore, in this case though the recovery of money may pertain to a period 2013 to 2017 but it was the first response/letter from the defendant bank which is dated 17.10.2017, firmly rejecting the interest claimed by the plaintiff and giving rise to a valid cause of action and a right to sue to the plaintiff. Furthermore, the plaintiff has also served a legal notice Ex.PW1/24(colly) upon the defendants claiming the said interests which has also been firmly repudiated by the defendants vide their reply dated 18.04.2018 Ex.PW1/25(colly). Thus, If 17.10.2017 is considered for reckoning of the period of limitation under Article 113 of the Act, the instant suit MUKESH Digitally signed by MUKESH being filed on 04.12.2018 is well within the period of limitation, after KUMAR KUMAR GUPTA Date:
GUPTA 2025.11.06
17:04:50
+0530 CS (Comm.) No.555/2018 Guru Nanak International Pvt. Ltd. Vs. Bank of India & Ors. Page no. 36 of 72
applying the aforesaid succinct law laid down by Hon'ble Apex Court of India.
26. This issue is decided, accordingly, against the defendants and in favour of the plaintiff.
ISSUE No.2: "Whether the plaintiff is entitled to the amount as claimed for ?OPP
27. The onus of proving this issue was held upon the plaintiff and since this issue pertains to the entitlement of the plaintiff to the recovery of amount claimed, the same is pivotal to the instant case. The plaintiff has claimed the aforesaid amount on the basis of charging of excess interest and penal interest by the defendant No.1 bank, as per pleadings, though by the end of trial, Ld. Counsel for plaintiff Ms. Sharma has claimed it solely on the basis of penal interest allegedly illegally charged by the defendant No.1 bank.
28. The plaintiff has claimed recovery of Rs.40,53,648/- on two counts, one is charging of excess interest in contravention of the agreed terms and condition of sanction letters Ex.PW1/3(colly), Ex.PW1/4(colly) and Ex.PW1/5(colly) and secondly charging of penal interest @ 1% and 2% per annum on account of alleged default in the terms and condition of sanction. Though the plaintiff in its claim has not been clear in use of the aforesaid two terms distinctly and has often used the terms interchangeably using the term excess or excessive interest to Digitally MUKESH signed by MUKESH KUMAR include penal interest also, so much so that the legal notice dated KUMAR GUPTA GUPTA Date:
2025.11.06 17:04:56 +0530 CS (Comm.) No.555/2018 Guru Nanak International Pvt. Ltd. Vs. Bank of India & Ors. Page no. 37 of 72 03.04.2018 Ex.PW1/24(colly) sent by the plaintiff to the defendant even barely mentions the term 'penal interest' and mainly focuses on excess interest despite the fact that it mentions the calculation for the suit amount of Rs.40,53,648/- with its breakup year-wise calling upon the bank to release such amount which, as per the plaintiff, the defendant No.1 bank has charged arbitrarily and without any justifiable reason.
Now if the evidence of the parties in this regard is carefully marshalled, the plaintiff has claimed that interest rates were suddenly increased by the defendant bank in the sanction letter dated 10.03.2016 Ex.PW1/5(colly) when compared to the grant of earlier sanctions for both cash credit facility and term loan facility and to that extent, the plaintiff has drawn calculation in its plaint as also the letters vehemently relied upon to the extent of Rs.17,642/- and Rs.39,972/-, however, by the time, the plaintiff has given its final calculation in para No.26 of the plaint, the total claimed liability against the defendants is calculated to Rs.40,53,648/- with the calculation table reflecting only two heads - penal interest charged and interest on penal interest charged. The plaintiff has vehemently relied upon its letter dated 11.02.2015 Ex.PW1/10(colly) to set out its claim showing the grievance to the defendant No.1 bank regarding charging of excess interest for the first time. The plaintiff has mentioned various aspects in this letter raising the issue of charging of excess interest. However, it has not been per se specific in the entire letter regarding charging of penal interest @ 1% or 2% and has only mentioned that penal charges were proposed for non-obtaining of external ratings from Credit Agencies. The letter also calculates an Digitally MUKESH signed by MUKESH KUMAR interest to the tune of Rs.12,28,834/- uptil Financial Year ending KUMAR GUPTA GUPTA Date:
2025.11.06 17:05:05 +0530 CS (Comm.) No.555/2018 Guru Nanak International Pvt. Ltd. Vs. Bank of India & Ors. Page no. 38 of 72 31.03.2015 and an excess interest to the tune of Rs.12,99,167/- for the period 01.04.2015 to 31.03.2016. It also mentions that the details of the calculation are enclosed for ready reference of the bank and finally, makes a request for reduction of rate of interest to make it comparable with the present market condition and refund excess interest charged by the bank at the earliest. This letter also mentions the renewal of the credit facilities at an increased rate of 15.10% ( in case of Cash Credit Limit) and 15.60% (in case of Term Loan Facility) by mentioning the increase of rate of interest when added to the base rate (or the Bank Prime Lending Rate, BPLR).
29. Now if this letter Ex.PW1/10(colly) is carefully perused, the so called first letter of the plaintiff is actually wrongly dated and the correct date of this letter is February 11, 2016 and (not February 11, 2015) which can be reflected from receipt stamp of the bank which shows the date of receipt as 25.02.2016. This letter is verbatim reproduction in its contents to letter dated February 11, 2016 Ex.PW1/14(colly) (received by the defendant bank on 01.03.2018) with the difference of adding one additional paragraph at the end in bold letters seeking revision of the interest rate on both the term loan facilities and cash credit facilities. Pertinent to mention that the plaintiff has placed reliance on Ex.PW1/10(colly) to be the first letter dated 11.02.2015 though it is talking about the sanctioned rates of interest for the Financial Year 2016- 17 which could not have come to the knowledge of the plaintiff in February, 2015. Record shows that the bank has increased the interest Digitally rate from 13.35% to 15.60% (in case of term loan) and 12.85% to signed by MUKESH MUKESH KUMAR KUMAR GUPTA Date:
GUPTA 2025.11.06
17:05:14
+0530
CS (Comm.) No.555/2018 Guru Nanak International Pvt. Ltd. Vs. Bank of India & Ors. Page no. 39 of 72 15.10% ( in case of cash credit facility) to the plaintiff in the sanction letter issued on 10.03.2016 Ex.PW1/5(colly). It is an admitted case of both the parties that the grant of these facilities were subjected to agreement between the parties which can be reflected from the sanction letter Ex.PW1/3(colly),Ex.PW1/4(colly) and Ex.PW1/5(colly) and also admitted by PW-1 during his testimony. It is also an admitted fact that the credit facilities are for a specified term of one year at the express consent of the parties only and could not have been automatically renewed by either the plaintiff or the defendants. Pertinently Ex.PW1/5(colly) which is sanction letter dated 10.03.2016 enhancing the rate of interest by the defendant No.1 bank is duly accepted alongwith its terms and conditions mentioned in the annexures and proposals and has been duly signed by Ms. Neelam Batra as Director of the plaintiff with its stamp. The defendant no.1 bank being Government Financial Institution is statutorily regulated by The Banking Regulation Act, 1949 (as amended up-to-date) and the rules and regulations framed by the Reserve Bank of India from time to time. Since the defendant bank is a government institution commercially free to negotiate its terms and conditions within the four corners of the aforesaid statutory frame work and guidelines of RBI and charging of interest at higher rate considering the economic capacity of borrower, its market rating and other conditions, section 21A of the Banking Regulation Act, 1949 also comes as a bar to any court looking into the rate of interest charged by a banking company on the ground that such transaction is excessive. The aforesaid statutory provision appears to have been enacted by the Parliament Digitally signed by primarily to give more autonomy to the banking institutions and its MUKESH MUKESH KUMAR KUMAR GUPTA Date:
GUPTA 2025.11.06 CS (Comm.) No.555/2018 Guru Nanak International Pvt. Ltd. Vs. Bank of India & Ors. Page no. 40 of 72 17:05:22 +0530 customers to negotiate the terms and conditions freely in accordance with the changing market conditions and commercial interest in the interest of larger National economy. Though, Ld. Counsel for defendant has taken the objection under the aforesaid section for the first time during the course of final arguments, however, the said plea being a statutory plea, the same can be considered by the court even if it is taken during the course of final arguments.
30. Section 21A of the Banking Regulations Act, 1949, provides that:
"notwithstanding anything contained in the Usurious Loans Act, 1918 (10 of 1918), or any other law relating to indebtedness in force in any State, a transaction between a banking company and its debtor shall not be re-opened by any Court on the ground that the rate of interest charged by the banking company in respect of such transaction is excessive."
31. The intent of legislature behind enacting the said section is that the court cannot re-open the account relating to a transaction between a Banking Company and its customers on the ground that the rate of interest charged, in the opinion of the court, is excessive or unreasonable, as far as the rate of interest is within the permissive limit as fixed by the RBI vide its circulars/directions. However, the said transaction can be re-opened by the court, if the rate of interest charged by the bank exceeds the maxima fixed by the RBI. There is a distinction between court's power to interfere on the premise that the interest charged is excessive Digitally signed by under the general law and the interest charged contravenes the MUKESH MUKESH KUMAR KUMAR GUPTA GUPTA Date:
2025.11.06 circulars/directions issued by the RBI. In the former case, it would not 17:05:34 +0530 CS (Comm.) No.555/2018 Guru Nanak International Pvt. Ltd. Vs. Bank of India & Ors. Page no. 41 of 72 be permissible in view of the bar imposed by the aforesaid section while in the latter case, it would be permissible as the Reserve Bank's circular and directions have statutory force under Section 21/35A of the Banking Regulation Act, 1949. Reliance placed on Corporation Bank Vs. D.S. Gowda and Ors. MANU/SC/0788/1994 and Central Bank of India Vs. Ravindra and Ors. MANU/SC/0663/2001.
32. Still if the case of the plaintiff in respect of the excess interest allegedly charged by the defendant No.1 bank in contravention of the agreed terms and conditions is carefully seen, even the same does not hold ground in the wake of the evidence which has come on record. It is not the case of the plaintiff that the Cash Credit and Term Loan Facilities have been sanctioned at the fixed rate of interest as the very document of sanction Ex.PW1/3(colly) to Ex.PW1/5(colly) used the term Base Rate or is used as BPLR which means Bank Prime Lending Rate which is actually the interest rate fixed by the RBI for commercial banks to follow and means that rate of interest on which banks can grant loans. This BPLR is a fluctuating or floating rate of interest which increases or decreases with time depending upon the market economic condition and requirement of national economy. Thus, the plaintiff was well aware that the aforesaid facilities had been granted at floating rate of interest prevalent at the time of entering into the contract which otherwise is also a beneficial rate of interest for the consumer vis-a-vis fixed rate of interest. The plaintiff has claimed in its letter dated 15.07.2015 Ex.PW1/11(colly), which is actually the first letter of grievance written Digitally signed by MUKESH MUKESH KUMAR GUPTA by the plaintiff to the defendant No.1 bank [and not Ex.PW1/10(colly) as KUMAR Date:
GUPTA 2025.11.06 17:05:42 +0530 CS (Comm.) No.555/2018 Guru Nanak International Pvt. Ltd. Vs. Bank of India & Ors. Page no. 42 of 72 claimed] that the initial sanction of cash credit limit was @ BPLR plus 3.75% coming to 13.75% whereas the defendant bank has charged 14% (@ BPLR +4%) for the period 09.02.2013 to 30.06.2013 leading to charging of excess interest of Rs.17,642/- and has also claimed that the effective rate of interest from October, 2014 was 13.95% though the bank has charged interest @19.25% leading to an excess interest of Rs.39,972/-. If these claims are carefully seen, the same are not supported by any documentary evidence showing that the rate of interest charged by the defendants exceeds either the rate of interest agreed to by the parties at the time of contract or the maxima fixed by the RBI. When the sanction letter dated 15.01.2013 Ex.PW1/3(colly) is carefully perused the same specifically mentions the rate of interest @ 3.75% +OBR and also mentions 0.50% as tenure premium. It also mentions the combined pricing i.e. the rate of interest to be presently 14.75 % per annum with monthly rests in case of Term Loan Facility and 14.25 % per annum with monthly rests in case of Cash Credit Facility. Admittedly, the defendant No.1 bank has not charged beyond the aforesaid limit. Similarly when the Statement of Account relied upon by the plaintiff Ex.PW1/19(colly) is carefully perused the same does not show any entry for the aforesaid period charging a higher rate of interest but shows the rate of interest to be charged as per agreed terms and conditions of sanction. In terms of Section 21A of the Banking Regulation Act, 1949, the court can only intervene to re-open the transaction between the parties where the bank has charged the interest beyond the rate as agreed by the parties on the date of contract provided that such rate does not exceed the outer limit Digitally signed by MUKESH KUMAR MUKESH KUMAR GUPTA fixed by the RBI and since the charging of excess interest is neither Date:
GUPTA 2025.11.06
17:05:49
+0530
CS (Comm.) No.555/2018 Guru Nanak International Pvt. Ltd. Vs. Bank of India & Ors. Page no. 43 of 72 reflected from the Statement of Account Ex.PW1/19(colly) nor by leading any cogent evidence on record, the court is bound by the letter and spirit of the Section 21A of the Banking Regulation Act, 1949 and as such cannot reopen the transaction between the parties.
33. One of the vehement contention raised by the plaintiff for excess interest also is regarding charging of 0.50% as additional interest w.e.f. 01.04.2016 on account of external credit rating of the plaintiff being 'B'. The plaintiff while referring to its communication Ex. PW1/22(colly) has taken a stand that the condition of obtaining a credit rating from a credit agency was brought to the notice of the plaintiff by the defendants as a surprise additional requirement and the increase in the interest rate in the sanction dated 10.03.2016 Ex. PW1/5 @ 15.60 % and 15.10% in case of term loan and cash credit facility respectively was unjustified and for which the plaintiff has been continuously requesting the defendant to decrease the excess rate of interest charged on these facilities while requesting the defendant bank to revert back to the terms and conditions as was originally offered by the bank at the time of initial sanction. However, even on this count, the contention raised by the plaintiff does not hold ground in as much as clause 53 of he terms and conditions of first sanction letter dated 15.01.2013 Ex. PW-1/3(colly) laid down that the bank has the right to carry out credit rating exercise every year when the facilities are reviewed or this exercise of credit rating can be made at frequencies considering necessary by the bank. It also provides that the Digitally rate of interest chargeable to the facilities would depend upon the credit signed by MUKESH MUKESH KUMAR KUMAR GUPTA Date:
rating so obtained by the borrowing firm / company which shows that the GUPTA 2025.11.06 17:05:56 +0530 CS (Comm.) No.555/2018 Guru Nanak International Pvt. Ltd. Vs. Bank of India & Ors. Page no. 44 of 72 plaintiff was required to obtain credit rating at the time of review of each sanction and the bank had all the rights to increase or decrease the rate of interest on the face of its credit rating.
34. Thus, the claim of the plaintiff for charging of excess interest by the defendant does not pass the test of factual matrix and the yardstick of preponderance of probabilities and is as such liable to be rejected.
35. Now adverting to the main contention of plaintiff that the defendant No.1 bank has charged penal interest to the tune of Rs.40,53,648/- which includes an interest on penal interest to the tune of Rs.8,37,241/- during the F.Y. 2013-14 to F.Y. 2017-18 on the cash credit and term loan facilities sanctioned vide Sanction Letters dated 15.01.2013, 28.03.2014 and 10.03.2016 Ex. PW1/3(colly) to Ex.
PW1/5(colly) respectively. Trite to mention here that the terms and conditions of the aforesaid facility for the year 2016-2017 (valid uptil 31.01.2017) was partially modified by the defendant bank vide its letter dated 17.10.2016 Ex.PW1/6 thereby reducing the interest rates from 15.10% per annum to 13.20% per annum on cash credit facility and from 15.60% per annum to 13.70% per annum on the term loan facility w.e.f. 28.09.2016. This reduction as per the bank communication Ex.PW1/6(colly) is on account of internal rating of ABS for the year 2015-16 and also mentions to include tenor premium of 0.50% for risk rate of 150%.
36. The case of the plaintiff is that penal interest @ 1% and 2% has Digitally signed MUKESH by MUKESH KUMAR GUPTA KUMAR Date:
2025.11.06 GUPTA 17:06:03 +0530 CS (Comm.) No.555/2018 Guru Nanak International Pvt. Ltd. Vs. Bank of India & Ors. Page no. 45 of 72 been charged by the defendant No.1 bank arbitrarily, without any reasons and in contravention of the agreed terms and conditions of sanction. Additionally, it has been contended that the bank has failed to give even a show cause notice to the plaintiff before imposing such penal interest despite the fact that the plaintiff has duly complied with all the terms and conditions of sanction including the credit rating. The plaintiff has finally relied upon the copy of the e-mail dated 05.05.2016 to contend that the aforesaid document of the defendant bank is virtually an admission of their mistake and thus entitles the plaintiff for recovery of the penal interest charged from the plaintiff.
37. Per contra, the defendant has maintained that the plaintiff has availed the aforesaid two facilities and duly agreed to the terms and conditions of sanction letters issued by the defendant bank from time to time and whatever interest including penal interest, has been charged by the defendant No.1 bank, the same is strictly in compliance with the terms of agreed terms and conditions of sanctioned loan facilities. It has been contended that the plaintiff after enjoying the facilities for such a long time has used the same for its commercial gains and cannot now raise unnecessary issues that too when the defendant No.1 bank has not violated any terms or condition of the sanction and any personal vengeance has been alleged. The defendants have not only disputed the calculation sheet filed by the plaintiff alongwith the Statement of Account Ex.PW1/18(colly) but has vehemently disputed the interpretation of e-mail dated 05.05.2016 to be any admission on part of Digitally the defendant leading to any liability as claimed by the plaintiff.
signed by
MUKESH
MUKESH KUMAR
KUMAR GUPTA
Date:
GUPTA 2025.11.06
17:06:14
+0530
CS (Comm.) No.555/2018 Guru Nanak International Pvt. Ltd. Vs. Bank of India & Ors. Page no. 46 of 72
38. Now if the case of the plaintiff is examined in the light of documentary as well as oral evidence which has come on record, it is an admitted fact that the bank has charged a total penal interest of Rs.40,53,648/- which includes interest on penal interest as claimed. The defendant No.1 bank has during the course of admission-denial of documents has virtually admitted almost all the documents of the plaintiff (though as per contention raised by the defendant only indicates existence of these documents and not the contents thereof, thereby not obviating the need of proof) except the ledger account of the plaintiff for the period 01.04.2014 to 10.05.2017, the Certificate under Section 65-B of the Indian Evidence Act filed by the plaintiff in support of its calculation sheet and the copy of notice under Order XII Rule 8 CPC sent by the plaintiff to the defendant No.1 bank asking for certain documents. The bank has also vehemently disputed the much relied internal e-mail of the defendant No.1 bank dated 05.05.2016 Ex. PW1/16 besides the penal interest summary for the financial year 2013-14 Ex. PW1/19(colly). Since there is no dispute regarding charging of penal interest to the tune of Rs. 40,53,648/- by the defendant No.1 bank from the plaintiff, the only question which remains for adjudication is whether this penal interest amount has been charged in contravention of the agreed terms and conditions of the facility/sanction granted by the defendant bank to the plaintiff from time to time vide sanctions Ex.PW1/3 (colly)to Ex.PW1/5(colly).
39. Admittedly, the relation between the plaintiff and the defendant is Digitally signed MUKESH by MUKESH KUMAR GUPTA KUMAR Date:
commercial in nature, the same are governed by the contractual rights 2025.11.06 GUPTA 17:06:21 +0530 CS (Comm.) No.555/2018 Guru Nanak International Pvt. Ltd. Vs. Bank of India & Ors. Page no. 47 of 72 and obligations created by the contract namely the terms and conditions of sanction letters Ex.PW1/3(colly), Ex.PW1/4(colly) and Ex. PW1/5(colly). As per the contention of the plaintiff, there is absolutely no reason for charging of the penal interest by the defendant bank which has charged the same arbitrarily and without any justification despite the fact that there has been due compliance of the agreed terms and conditions by the plaintiff, while on the other hand, the defendant No.1 bank has justified its action on the same terms and conditions of sanctions explaining the same and relying heavily upon its letter dated 17.10.2017 Ex.PW1/21 written by the defendant bank in response to the plaintiff's letter dated 22.09.2017 Ex.PW1/20(colly). The plaintiff has then relied upon its rejoinder letter dated 24.12.2017 Ex.PW1/22(colly) written not only to the AGM of the Karol Bagh Branch of the defendant but also to the General Manager, Zonal Manager and even the Managing Director of the defendant bank.
40. The relevant terms and conditions for imposition and charging of penal interest as per Sanction Letters Ex.PW1/3(colly), Ex.PW1/4(colly) and Ex.PW1/5(colly) are reproduced for clarity :
Sanction Letter dated 15.01.2013 (credit facility valid uptil 14.01.2014):
Annexure II Other Terms and Conditions & Covenants etc. application to the sanctioned facility (IES) :
1. ......Digitally signed
10. The firm/company is required to submit QIS I, II & by MUKESH MUKESH KUMAR KUMAR GUPTA Date:
2025.11.06 III returns. QIS I (showing estimates) is required to be GUPTA 17:06:28 +0530 CS (Comm.) No.555/2018 Guru Nanak International Pvt. Ltd. Vs. Bank of India & Ors. Page no. 48 of 72 submitted in the week preceding the commencement of the quarter to which it relates, QIS II (showing performance) within six weeks from the close of the quarter to which the statement relates and QIS III (half yearly operating statement) within two months from the close of the half-year. The firm has to submit statement of stocks as well as Monthly Select Operational Data (MSOD) every month latest by 10th of the following month. Any delay without specific approval from the bank will attract penal rate of 1%p.a. for the delayed period. If statements are not submitted for continuous period of 3 months, penal interest @ 2% р.а. will be recovered as per the guidelines of the bank. Bank may also initiate further action as deemed necessary by the Bank.
12. The firm/Company to declare/undertake to us:
to supply to us, audited financial statements of the firm/company within 6 months from closure of financial year. Any delay in submitting these audited financial statements without our specific approval will attract penal interest @1%p.a. In case these statements are not received by us for a continuous period of 3 months, the bank may take further action as deemed fit by the bank.
to provide to us promptly information (along with comments/explanation) about all material and adverse Digitally signed changes in your project/business, ownership, management, MUKESH by MUKESH KUMAR GUPTA KUMAR Date:
GUPTA 2025.11.06 liquidity, financial position etc. 17:06:37 +0530 that any liabilities or obligations under the facilities shall not, at any time, rank postponed in point and security to any other obligation or liabilities to other lending institutions or banks or creditors, unless expressly agreed or permitted CS (Comm.) No.555/2018 Guru Nanak International Pvt. Ltd. Vs. Bank of India & Ors. Page no. 49 of 72 by bank.
not to create or permit to subsist any mortgage, charge (whether floating or specific), pledge, lien or other security interest on any of your undertakings, properties or assets, without our prior consent in writing. The firm will maintain adequate net working capital at all times to meet margin requirements as per bank's guidelines.
23. Audited financial statements to be submitted within six months from the close of the financial year failing which penal interest at 1% p.a. up to 3 months and thereafter at 2% p.a. will be charged till date of submission.
24. Penal interest of 2% p.a. will be levied on the overdue amount for the period account remains overdrawn due to irregularities such as non payment of interest immediately on application, non payment of installments within one month of their falling due, reduction in drawing power/limit, excess borrowings due to over limit/ devolvement of L/C/ invocation of Guarantee etc. If the account continues to be overdrawn for a period of 90 days, the bank may consider initiation of other action also as deemed fit by the bank.
25. Any default in complying with terms of sanction within the stipulated time will attract penal interest of 1% p.a. from MUKESH Digitally signed by MUKESH KUMAR GUPTA the date of expiry of such time.
KUMAR Date:
GUPTA 2025.11.06
17:06:44 +0530
26. In case of default either in the payment of interest, the repayment of the principal amounts as and when due and payable or reimbursement of all costs, charges and the expenses when demanded, you shall pay additional interest CS (Comm.) No.555/2018 Guru Nanak International Pvt. Ltd. Vs. Bank of India & Ors. Page no. 50 of 72 at the rate of 2% above the interest rate for the facilities on the overdue interest, costs, charges or expenses and/or from the respective due dates for payment and/or repayment.
27. CMA data to be submitted at least one month before the due date of review. Any delay without specific approval from the bank will attract penal rate @1% p.a. In case CMA data is not submitted for a continuous period of three months, penal interest @ 2% p.a. will be charged till date of submission and the bank may also take further action as deemed fit by the Bank.
28. The company/firm to ensure submission of statement of Assets & Liabilities in Bank's format CBD - 23 (duly certified by a C.A.) along with copies of Income Tax and Wealth Tax returns/assessment orders of all the directors and guarantors every year.
53. The Bank carries out the credit rating exercise every year when the facilities are reviewed. However, it reserves the right to carry out the credit rating exercise of the facilities at frequencies considered necessary and the rate of interest chargeable to the facilities would depend upon the rating obtained by the borrowing firm/Company.
Sanction Letter dated 28.03.2014 (credit facility valid uptil 25.03.2015):
Annexure I Post-Disbursement Conditions Digitally signed MUKESH by MUKESH
1. The company to convert share application money of KUMAR KUMAR GUPTA Date: 2025.11.06 GUPTA 17:06:50 +0530 Rs.46.00 lacs into paid up capital only within two months of sanction. Statutory Auditors certificate to this effect to be submitted by the Company. Non compliance would attract penal interest of 1%.
CS (Comm.) No.555/2018 Guru Nanak International Pvt. Ltd. Vs. Bank of India & Ors. Page no. 51 of 72
4. Non obtention of credit rating after three months upto six months, Penal interest @ 1% p.a. and thereafter 2% p.a. will be charges.
Annexure II Other Terms and Conditions & Covenants etc. application to the sanctioned facility (IES) :
1. ......
10. The firm/company is required to submit QIS I, II & III returns. QIS I (showing estimates) is required to be submitted in the week preceding the commencement of the quarter to which it relates, QIS II (showing performance) within six weeks from the close of the quarter to which the statement relates and QIS III (half yearly operating statement) within two months from the close of the half-year.
The firm has to submit statement of stocks as well as Monthly Select Operational Data (MSOD) every month latest by 10th of the following month. Any delay without specific approval from the bank will attract penal rate of 1%p.a. for the delayed period. If statements are not submitted for continuous period of 3 months, penal interest @ 2% р.а. will be recovered as per the guidelines of the bank. Bank may also initiate further action as deemed necessary by the Bank.
12. The firm/Company to declare/undertake to us:
to supply to us, audited financial statements of the firm/company within 6 months from closure of financial year. Any delay in submitting these audited financial statements without our specific approval will attract penal MUKESH Digitally by MUKESH signed interest @1%p.a. In case these statements are not received KUMAR KUMAR GUPTA Date: 2025.11.06 GUPTA 17:06:59 +0530 CS (Comm.) No.555/2018 Guru Nanak International Pvt. Ltd. Vs. Bank of India & Ors. Page no. 52 of 72 by us for a continuous period of 3 months, the bank may take further action as deemed fit by the bank.
to provide to us promptly information (along with comments/explanation) about all material and adverse changes in your project/business, ownership, management, liquidity, financial position etc. that any liabilities or obligations under the facilities shall not, at any time, rank Annexure postponed in point and security to any other obligation or liabilities to other lending institutions or banks or creditors, unless expressly agreed or permitted by bank.
not to create or permit to subsist any mortgage, charge (whether floating or specific), pledge, lien or other security interest on any of your undertakings, properties or assets, without our prior consent in writing. The firm will maintain adequate net working capital at all times to meet margin requirements as per bank's guidelines.
23. Audited financial statements to be submitted within six months from the close of the financial year failing which penal interest at 1% p.a. up to 3 months and thereafter at 2% p.a. will be charged till date of submission.
24. Penal interest of 2% p.a. will be levied on the overdue amount for the period account remains overdrawn due to irregularities such as non payment of interest immediately on application, non payment of installments within one month of their falling due, reduction in drawing power/limit, excess Digitally signed MUKESH by MUKESH KUMAR borrowings due to over limit/ devolvement of L/C/ GUPTA KUMAR Date:
GUPTA 2025.11.06
17:07:06
invocation of Guarantee etc. If the account continues to be +0530 CS (Comm.) No.555/2018 Guru Nanak International Pvt. Ltd. Vs. Bank of India & Ors. Page no. 53 of 72 overdrawn for a period of 90 days, the bank may consider initiation of other action also as deemed fit by the bank.
25. Any default in complying with terms of sanction within the stipulated time will attract penal interest of 1% p.a. from the date of expiry of such time.
26. In case of default either in the payment of interest, the repayment of the principal amounts as and when due and payable or reimbursement of all costs, charges and the expenses when demanded, you shall pay additional interest at the rate of 2% above the interest rate for the facilities on the overdue interest, costs, charges or expenses and/or from the respective due dates for payment and/or repayment.
27. CMA data to be submitted at least one month before the due date of review. Any delay without specific approval from the bank will attract penal rate @1% p.a. In case CMA data is not submitted for a continuous period of three months, penal interest @ 2% p.a. will be charged till date of submission and the bank may also take further action as deemed fit by the Bank.
Sanction Letter dated 10.03.2016 (credit facility valid uptil 31.01.2017):
Annexure II All other Terms and Conditions & Covenants, including security (principal & Collateral), etc. applicable to the proposed facilities :
1. ......
11. Penal interest of 2% p.a. will be levied on the overdue Digitally signed by MUKESH amount for the period account remains overdrawn due to MUKESH KUMAR KUMAR irregularities such as non payment of interest immediately on GUPTA Date:
GUPTA 2025.11.06
17:07:13
+0530
application, non payment of installments within one month CS (Comm.) No.555/2018 Guru Nanak International Pvt. Ltd. Vs. Bank of India & Ors. Page no. 54 of 72 of their falling due, reduction in drawing power/limit, excess borrowings due to over limit. devolvement of L/C, invocation of Guarantee etc. If the account continues to be overdrawn for a period of 90 days, the bank may consider initiation of other action also as deemed fit by the bank.
12. Any default in complying with terms of sanction within the stipulated time will attract penal interest of 1% p.a. from the date of expiry of such time.
17. In case of default either in the payment of interest, the repayment of the principal amounts as and when due and payable or reimbursement of all costs, charges and the expenses when demanded, you shall pay additional interest at the rate of 2% above the interest rate for the facilities on the overdue interest, costs, charges or expenses and/or from the respective due dates for payment and/or repayment.
18. The Company is required to submit QIS I, II & III returns. QIS I (showing estimates) is required to be submitted in the week preceding the commencement of the quarter to which it relates. QIS II (showing performance) within 6 weeks from the close of the quarter to which the statement relates and QIS III (half yearly operating statement) within two months from the close of the half -
year. Any delay without specific approval from the bank will attract penal rate of 1% pa for the delayed period.
19. CMA data to be submitted at least one month before the due date of review Any delay without specific approval from the bank will attract penal rate @1%p.a. In case CMA data is not submitted for a continuous period of three months, the Digitally signed by MUKESH bank may take further action as deemed fit by the Bank. MUKESH KUMAR
22. Company to declare/undertake to us:
GUPTA KUMAR Date:
GUPTA 2025.11.06 17:07:20 +0530 CS (Comm.) No.555/2018 Guru Nanak International Pvt. Ltd. Vs. Bank of India & Ors. Page no. 55 of 72 to supply to us, audited financial statements of the Company within 6 months from closure of financial year. Any delay in submitting these audited financial statements without our specific approval will attract penal interest @1% p.a. In case these statements are not received by us for a continuous period of 3 months. the bank may take further action as deemed fit by the bank.
41. Now if the aforesaid terms and conditions of sanction are carefully analyzed, they laid down the obligations which the plaintiff is required to comply from time to time with strict timelines and even prescribes consequences of non compliance in the form of imposition of penal interest @ 1% or 2% for the period of delay, continued delay beyond a period and even withdrawal of both cash credit and term loan facility if the default continues. The plaintiff, on the other hand, has claimed all the compliances being made from time to time thereby leaving no reasons for the defendant bank to impose penal interest. When specifically asked about the documentary evidence showing compliances, the plaintiff has vehemently relied upon its letter dated 18.08.2015 (Ex.PW1/13) to show that all compliances of obligations undertaken by the plaintiff in the sanction letters Ex. PW-1/3(colly), Ex. PW-1/4(colly) and Ex. PW-
1/5(colly) for the year 2013, 2015 and 2016, taking a stand that the letter clearly mention the submissions of necessary documents within the stipulated period which was available to the plaintiff after six months from the close of the relevant financial year. However, when the Digitally signed by aforesaid letter Ex. PW-1/13 is carefully perused vis a vis the sanction MUKESH MUKESH letters, the stand taken by the plaintiff becomes legally unsustainable. It KUMAR KUMAR GUPTA Date:
GUPTA 2025.11.06
17:07:26
+0530
CS (Comm.) No.555/2018 Guru Nanak International Pvt. Ltd. Vs. Bank of India & Ors. Page no. 56 of 72
may be seen that the letter Ex.PW1/13 is an application for renewal of cash credit facility which expired on 25.03.2015 in terms of Ex.PW1/4 where it was specifically mentioned in Clause 1 of the relevant terms that the sanction continues in force for the period of one year and are subject to annual review which falls due on 25.03.2015. This letter clearly mentions that the plaintiff company due to certain external constraints like metro construction work at Ring Road has affected its retail customers leading to its inability to achieve projected turnover as envisaged in earlier sanction letters. The letter further mentions that now the documents have been annexed to renew the cash credit limit. The letter further mentions a request for bringing down the interest rate on account of higher input rates and squeezing margins seeking a decrease of BPLR+1.65%. Additionally while mentioning the other circumstances, the letter also requests for refund of an interest of Rs.12,86,450/- by explaining various factors including charging of penal interest @ 1% and 2% continuously to the tune of Rs. 12,28,834/- mentioning that a detailed worksheet has been enclosed with the letter. Thus, if the letter is clearly seen, the same while admitting the inability to reach the projected turnover also prays for renewal of cash credit facility for the F.Y. 2015-16 thereby submitting certain documents. This letter has to be juxtaposed with the terms and conditions of sanction as mentioned aforesaid. If the terms and conditions are carefully analyzed, the plaintiff was put under strict obligation to file QIS (Quarterly Information Statement), MSOD (Monthly Select Operational Data), and stock statement for each sanction period during the F.Y. 2013-14 to F.Y. 2017-18 on periodic basis as Digitally provided in Clause 10 of Ex. PW-1/3(colly) and Ex.PW1/4(colly) and signed by MUKESH MUKESH KUMAR KUMAR GUPTA GUPTA Date:
2025.11.06 17:07:34 +0530 CS (Comm.) No.555/2018 Guru Nanak International Pvt. Ltd. Vs. Bank of India & Ors. Page no. 57 of 72 Clause 4 and 18 of Ex.PW1/5(colly). If these Clauses of each sanction is carefully analyzed, the QIS is to be submitted either preceding the quarter, six weeks after close of the second quarter or two months from the close of the third quarter of relevant year as the case may be. The plaintiff was also required to submit stocks statement and MSOD every month latest by 10th of the following month. It also provides for strict compliances of the same and the consequences for the delay by specifying that the delay will attract a penal rate of 1% for the delayed period and in case of a continuous default of three months, an increased penal rate of 2% besides initiating necessary action as the bank may deem fit.
42. It may be seen that the conditions of such submissions of Stock Statement/QIS/MSOD were made further onerous by the defendant No.1 bank with subsequent sanctions Ex. PW-1/4(colly) and Ex.PW-1/5(colly), wherein, clause 4 of the terms even takes away the exemption clause which was available to the plaintiff with the specific approval of the bank at the time of first sanction Ex. PW-1/3(colly). When placed vis a vis the aforesaid agreed framework, letter dated 18.08.2015 Ex. PW-1/13 sought to be relied upon by the plaintiff as full compliance of the conditions of sanction merely mentions the annexed documents like CMA (Credit Monitoring System) data, audited balance sheet for the year ending 31.03.2014, provisional balance sheet, month-wise summary of sales and duly signed copies of CBD-23 (Net Worth Statement) of all the Directors and Guarantors. These documents are in compliance of clause 12, clause 23, clause 27 and clause 28 and by no stretch of imagination can be Digitally signed by MUKESH MUKESH KUMAR GUPTA KUMAR Date:
GUPTA 2025.11.06
17:07:40
+0530
CS (Comm.) No.555/2018 Guru Nanak International Pvt. Ltd. Vs. Bank of India & Ors. Page no. 58 of 72 called a compliance of clause 10, 4 and 18 (as per respective sanctions) which required a continuous submission of the QIS, Stock Statement and MSOD by the plaintiff. The plaintiff, on its part, has failed to show submission of such data within the specified time frame to the defendants by way of any documentary or even oral evidence brought on record.
Imperatively, the plaintiff is required to show specific acknowledgments of submission of these data from time to time on record to prove its case showing due compliance in time and refuting the right of the defendant No.1 bank to impose agreed penal interest as per sanctions Ex.PW1/3(colly) to Ex.PW1/5(colly).
43. This imposition of penal interest, when questioned by the plaintiff vide Ex.PW1/20(colly), the defendant No.1 bank vide its letter dated 17.10.2017 Ex. PW-1/21, in response has clearly specified that the penal interest has been charged into the account of the plaintiff for irregular submission of stock statement / MSOD / QIS. Imperatively, the aforesaid stipulations of timely submissions of these statements / data is relatable to the conditions laid down in the relevant clause of the sanction letters Ex. PW-1/3(colly) to Ex.PW1/5(colly), which not only stipulates specific time line but also stipulates strict consequences including imposition of penal interest. Admittedly, the plaintiff has failed to show compliance of this condition under the sanction letters which was a binding contract between the parties creating contractual rights and obligations. Thus, the letter dated 18.08.2015 Ex. PW-1/13 cannot be called a compliance of all the terms and conditions of the sanction letters, thereby invalidating the Digitally signed by MUKESH MUKESH KUMAR KUMAR GUPTA GUPTA Date:
2025.11.06 action of the defendant for imposition of penal interest. 17:07:49 +0530 CS (Comm.) No.555/2018 Guru Nanak International Pvt. Ltd. Vs. Bank of India & Ors. Page no. 59 of 72
44. The plaintiff has then relied upon the testimony of its sole witness PW1 Tarsem Lal Batra and also its various communications made to the defendant bank right from its first letter dated 15.07.2015 Ex.PW1/11(colly) to its letter dated 21.06.2016 Ex.PW1/15(colly) besides relying upon its detailed letter dated 22.09.2017 Ex.PW1/20(colly) and lastly letter dated 24.12.2017 written to all the Authorities uptil the level of Managing Director of the defendant No.1 bank Ex.PW1/22(colly) in support of its case to show that the penal interest was imposed by the bank unjustifiably and without any reasons, in other words, to show that there has always been due compliances, by the plaintiff, of the terms and conditions of sanctions issued by defendant No.1 bank from time to time. The plaintiff has made this endevour to seek refund of both excess as well as penal interest during subsistence of credit facility which in itself is an admission of the knowledge of the plaintiff about imposition of penal interest by the defendant No.1 bank which was sought to be withdrawn/refunded by several requests.
Pertinently, it is a matter of record that despite these requests, neither the same was withdrawn or refunded nor the terms and conditions of the Cash Credit and Term Loan Facilities were modified. Rather the terms and conditions of these facilities have been made onerous from time to time with each renewal which has been duly accepted by the plaintiff every time fresh sanctions containing the onerous terms and conditions were issued vide Ex.PW1/4(colly) and Ex.PW1/5(colly). The turn of events and such acceptance by the plaintiff consciously shows that these letters vehemently relied upon by the plaintiff were actually in the nature of requests/pursuation seeking modifications of terms and conditions of Digitally signed MUKESH by MUKESH KUMAR GUPTA KUMAR Date:
2025.11.06 GUPTA 17:07:56 +0530 CS (Comm.) No.555/2018 Guru Nanak International Pvt. Ltd. Vs. Bank of India & Ors. Page no. 60 of 72 loan or the withdrawal of penal interest to its benefit. If the plaintiff was actually aggrieved and also had the knowledge of imposition of penal interest since 15.07.2015 nothing has stopped the plaintiff for either withdrawing from the facilities extended by the defendant No.1 bank by terminating the commercial contractual obligations under the sanctions Ex.PW1/3(colly) to Ex.PW1/5(colly) renewed from time to time or offering or show due compliances for withdrawal of penal interest. As already discussed, nothing has come on record in the form of evidence to show that the plaintiff has either submitted its stock statements/MSOD/QIS in time or submitted its requisite renewal data and information in time. It is a consistent stand of the defendants which has remained unrefuted by the plaintiff that the representative of the plaintiff Mr. Deepak Kumar Sharma was constantly dealing with the defendant No.1 bank in respect of these facilities on day to day basis. It is also an unrefuted stand of the defendant bank that the aforesaid representative Sh. Deepak Kumar Sharma was duly informed about the delaying in the submission of these data from time to time. Ex.PW1/21 which is the letter dated 17.10.2017 written by the defendant bank to the plaintiff in response to its letter dated 22.09.2017 clearly mentions that the calculations in respect of the interest charged has been duly verified by the aforesaid Deepak Kumar who has also been satisfied about the same. The rejoinder of the plaintiff Letter dated 24.12.2017 Ex.PW1/22(colly) also does not refute this fact anywhere in the letter. The bank vide Ex.PW1/21 has also informed that the interest concession was available to the plaintiff for a period of one year from the date of approval i.e. Digitally MUKESH signed by MUKESH KUMAR 28.03.2014 or next review of the plaintiff's account leading to KUMAR GUPTA Date:
GUPTA 2025.11.06
17:08:03
+0530 CS (Comm.) No.555/2018 Guru Nanak International Pvt. Ltd. Vs. Bank of India & Ors. Page no. 61 of 72
withdrawal of these concessions after expiry of the period of one year which has also not duly refuted by the plaintiff succinctly and rather the plaintiff has mentioned about some short term renewal of these facilities, though nothing in respect thereof has been proved on record. The aforesaid primary witness Sh. Deepak Kumar Sharma has failed to enter the witness box despite being mentioned in the list of witnesses and rather was given up by the plaintiff before the Court on 05.01.2023. Trite to mention that despite such unredressed grievances, the plaintiff continued with both the facilities and rather renewed the same twice with onerous terms and conditions even after the factum of imposition of penal interest by the defendant bank has duly come to its notice. The sole witness of the plaintiff PW-1 Sh. Tarsem Lal Batra who is the Director of the plaintiff company and who has exhibited these documents on record, did not bring to the notice of the Court any document or even any oral testimony to show that the plaintiff has made due compliances of the terms and conditions of the facilities extended by the defendant bank within the stipulated time. It is a matter of fact that no document has come on record to show that QIS/Stock statement/MSOD or the renewal data was submitted by the plaintiff to the defendant bank within the time frame despite the deadlines being specifically mentioned in each Sanction Letter. Pertinent to mention here that the consequences of non submission of the aforesaid data including renewal data in the form of imposition of penal interest @ 1% per annum for initial period and 2% per annum after lapse of certain period provided under the terms of contract. The plaintiff has failed to bring on record any document Digitally signed by showing any acknowledgment of these submissions in time and has MUKESH MUKESH KUMAR KUMAR GUPTA GUPTA Date: CS (Comm.) No.555/2018 Guru Nanak International Pvt. Ltd. Vs. Bank of India & Ors. Page no. 62 of 72 2025.11.06 17:08:16 +0530 merely relied upon the repeated communications/letters to buttress its case for refund of excess penal interest. Even during the course of lengthy arguments, Ld. Counsel for the plaintiff has merely relied upon these letters written by the plaintiff from time to time rather than relying upon any actual acknowledgment or documents refuting or controverting the justification given by the defendant in its letter dated 17.10.2017 Ex.PW1/21. Furthermore, if all these letters are carefully examined, they are more or less mentioning the facts and circumstances regarding the plaintiff being and established commercial institutions having relationship with the defendant bank with last 40 years, raising the issue of stiff competition, mentioning the increase of rate of interest the circumstances under which the projected turnover was not met, while also mentioning the charging of penal interest. However, no document has been brought on record to show that the penal interest was charged by the defendant bank in contravention of the terms and conditions agreed upon between the parties in the Sanction Letters Ex.PW1/3(colly), to Ex. PW1/5(colly).
45. Thus, taken on yardsticks of preponderance of probabilities and on the basis of the discussion aforesaid, these documents heavily relied upon by the plaintiff actually does not come to its rescue, so as to make out its entitlement to the amount claimed.
46. Much reliance has been placed by the plaintiff on the e-mail dated 05.05.2016 Ex.PW1/16 which is written by the Credit Manager of defendant no. 1 bank to its Head Office Star Shakti at 03:26 PM, calling Digitally signed by MUKESH MUKESH KUMAR GUPTA KUMAR Date:
GUPTA 2025.11.06
17:08:24 CS (Comm.) No.555/2018 Guru Nanak International Pvt. Ltd. Vs. Bank of India & Ors. Page no. 63 of 72
+0530
it an admission by the defendant to the claim of the plaintiff on the ground that the credit facility account of the plaintiff was running strictly in accordance with the terms and conditions of the sanction without any violations leaving no reasons for the defendant bank to impose penal interest to the tune of Rs.40,53,648/- for the F.Y. 2013-14 to 2017-18. It has been contended that the fact that account is running satisfactory but the system is charging penal interest @ 2% and 1% per annum since May 2015 and since the problem could not be accessed by the bank as to why such penal interest is applied. An attachment was sent by the defendant No.1 bank to its Headquarter for the period of interest applied since May 2015 asking the reasons for penal interest application and seeking guidance to rectify the same. Pertinent to mention here that Ex.PW1/16 was not admitted by the defendant initially. However, during cross-
examination of DW-1 Nikki Tyagi who has initially showed lack of any stand on the e-mail and has even stated that the same was not available on account of the fact being an old record has finally brought the printout thereof and got exhibited the same as Ex.DW1/PA. As such, the existence of this e-mail has finally remained undisputed during the trial. But the apposite question before the Court is whether this e-mail amounts to a legal admission of the defendant to the fact that the plaintiff has been running its account in accordance with the terms and conditions of the loan facility as agreed so as to fasten a liability on the defendant bank.
47. The law on admission as per Indian Evidence Act, 1872 (hereinafter referred to as the Act) is clear and an admission, as defined Digitally signed by MUKESH MUKESH KUMAR under Section 17 of the Act, is a statement oral or documentary or KUMAR GUPTA Date:
GUPTA 2025.11.06
17:08:30
+0530 CS (Comm.) No.555/2018 Guru Nanak International Pvt. Ltd. Vs. Bank of India & Ors. Page no. 64 of 72
contained in electronic form which suggests an inference as to any fact in issue or relevant fact. The section further provides that an admission can be made by any party to the proceedings, his representative or an agent authorized by such party under the circumstances as recognized, under sections 18 to 20 of the Act. Section 31 of the Act delineates the evidentiary value of admissions and provides that admissions are not conclusive proof of the matters admitted but they may operate as estoppel. A Full Bench of the Hon'ble Supreme Court in Bharat Singh And Anr. Vs. Bhagirathi MANU/SC/0362/1965, has succintly held that admissions have to be clear if they are to be used against the person making them. Admissions are substantive evidence by themselves, in view of sections 17 and 21 of the Act, though they are not conclusive proof of the matters admitted. In Union of India Vs. Ibrahim Uddin (2012) 8 SCC 148, the Hon'ble Supreme Court has held the pivotal aspect which is needed to be considered is what weight is to be attached to an admission and for that purpose it is necessary to find out as to whether it is clear, unambiguous and a relevant piece of evidence, and further the same is proved in accordance with the provisions of the Evidence Act, 1872. Thus, from the aforesaid discussion, it is clear that for fastening any liability, the admission should not only be specifically pointing out to the subject in a categoric manner but should also be clear, unambiguous and unequivocal. The much relied e-mail dated 05.05.2016 Ex.PW1/16 is written by the Credit Manager of defendant no. 1 bank to its Head Office Star Shakti wherein it is conveyed that the account of the plaintiff has been running satisfactorily Digitally signed by MUKESH MUKESH KUMAR GUPTA but the system is charging penal interest @ 2% and 1% per annum since KUMAR Date:
GUPTA 2025.11.06 17:08:43 +0530 CS (Comm.) No.555/2018 Guru Nanak International Pvt. Ltd. Vs. Bank of India & Ors. Page no. 65 of 72 May 2015 and the problem could not be accessed by the bank. The aforesaid statement of the Credit Manager gives rise to the two eventualities i.e. whether the aforesaid statement with respect to the status of plaintiff's account has been made by the Credit Manager for seeking opinion of Head Office Star Shakti or the same has been made absolutely to convey the account status of the plaintiff.
48. As far as first eventuality is concerned, law on one of the class of vicarious admission, i.e. admission of persons other than the party, as provided under Section 20 of the Act prescribes that statements made by persons to whom a party to the suit has expressly referred for information in reference to a matter in dispute are admissions. Further, in Hirachand Kothari (Dead) by LRs Vs. State of Rajasthan and Ors. MANU/SC/0278/1985, a Division Bench of the Hon'ble Supreme Court has held that Section 20 is the second exception to the general rule laid down in Section 18. It deals with one class of vicarious admission i.e. admissions of persons other than the party. Where a party refers to a third person for some information or an opinion on a matter in dispute, the statements made by the third person are receivable as admissions against the person referring. The reason is that when a party refers to another person for a statement of his views, the party approves of his utterance in anticipation and adopts that as his own. Therefore, the law is settled that the statements made by the third person are receivable as admissions against the person referring only if the reference has been expressly made by the party to the suit in respect of the matter in issue with a clear Digitally signed MUKESH KUMAR by MUKESH KUMAR GUPTA Date:
intention to refer the matter to the third person. In the instant case, 2025.11.06 GUPTA 17:08:49 +0530 CS (Comm.) No.555/2018 Guru Nanak International Pvt. Ltd. Vs. Bank of India & Ors. Page no. 66 of 72 though, an expressed reference has been made in respect of the matter in dispute, however, it is not clear from the content of the said e-mail that the aforesaid reference has been made with an intention to refer the matter to the Head Office of the defendant for seeking its opinion on the matter or otherwise. Even if the best case of the plaintiff is considered, there is nothing on record to show whether any opinion has been expressed or any information has been provided by the Head Office of the defendant Star Shakti in response to the said e-mail. In view of the aforesaid, the first eventuality cannot be considered by the Court.
49. Adverting to the second eventuality, although, there is an admission by the Credit Manager that the account of the plaintiff has been running satisfactorily, yet, the same is ambiguous and not unequivocal at all, as to specify in what manner or aspects the account of the plaintiff was running satisfactorily. As per the sanction letters, penal interest will be charged by the bank if the plaintiff either fails to submit the Stock Statement/MSOD/QIS-I II & III/ Audited Financial Statement etc. or makes any default in compliance of terms of sanction within the stipulated period of time. The Credit Manager has failed to specify whether the account was running satisfactorily merely in accounting and terms or also on account of timely submission of the aforesaid documents or due compliance of the other terms and conditions of the sanction letters. Further, there is no other cogent evidence on the record to corroborate the said admission in the e-mail. The plaintiff, on its part had all the options/opportunity to summon and examine the concerned Credit Digitally signed by MUKESH KUMAR MUKESH KUMAR GUPTA Manager to explain in what manner the account was running GUPTA Date:
2025.11.06 17:08:56 +0530 CS (Comm.) No.555/2018 Guru Nanak International Pvt. Ltd. Vs. Bank of India & Ors. Page no. 67 of 72 satisfactorily which it has failed to do. The very language of Ex.PW1/16 shows that the e-mail was nothing more than an internal communication between the bank functionaries of different level relating to the banking transaction, as per RBI guidelines. This internal communication was neither addressed nor available to the plaintiff as per deposition of DW-1 during her cross-examination. Any internal banking communication can, at best, be a deemed discussion between different level of banks for its efficient functioning and clearance of doubts. As already discussed, there is nothing to show on record that there was any acceptance of any recommendations made pursuant to the e-mail by higher officials of the defendant. Further, there is nothing on record to show that the terms and conditions of the loan facility extended to the plaintiff was ever modified or changed on the basis of aforesaid e-mail Ex.PW1/16. Even if the factum of existence of this e-mail being issued by the defendant is taken as not disputed, the evidentiary value and the weight it carries in terms of aforesaid discussion does not make it an unambiguous and unequivocal admission between the parties, creating a liability.
50. Finally adverting to the last ground of the plaintiff regarding requirement of issuance of a show cause notice by the defendant before imposition of penal interest on the facilities. Ld. Counsel for plaintiff has vehemently argued that no show cause notice or intimation was ever given by the defendant bank before imposing penal penal interest @ 1 % or 2 % in the accounts of the plaintiff from time to time which it was Digitally required to do making it unsustainable and arbitrarily. To buttress the signed by aforesaid arguments, Ld. Counsel for plaintiff has tried to rely upon MUKESH MUKESH KUMAR KUMAR GUPTA GUPTA Date:
2025.11.06 17:09:03 +0530 CS (Comm.) No.555/2018 Guru Nanak International Pvt. Ltd. Vs. Bank of India & Ors. Page no. 68 of 72 Clause 47(a) of the sanction letter dated 15.01.2013 Ex.PW1/3 and cross examination of DW-1 Nicky Tyagi who during cross examination has affirmed that generally bank issues notice to its customers with respect to levy / charging of interest, penal interest and any other interest whatsoever by the bank. Ld. Counsel for defendant has vehemently argued that there is no legal obligation or requirement of the defendant bank to mandatorily do so. If the documents, more particularly the sanction orders Ex. PW-1/3, Ex. PW-1/4 and Ex. PW-1/5 are carefully perused, it may be seen that none of the aforesaid sanction order prescribes any such procedure to be followed. On the contrary, the stipulations of clause 10, 12, 24, 25,26 and 27 are specific about the conditions under which penal interest may be charged by the bank. It may be seen that these stipulations even provide the circumstances with timelines within which in case of failure to do certain acts, the bank has been given right to impose penal interest or enhanced penal interest and in some cases to take further actions as deem necessary by the bank. Even Clause 47(a) of the terms and conditions of sanction Ex.PW1/3 is to be seen in the context in which it has been provided. It may be seen that the bank being a nationalized bank governed under the Banking Regulations Act, 1949 is strictly bound by the guidelines issued by the Reserve Bank of India from time to time including regulating the interest component as per the requirements of national economy. Clause 47(a) perceives a situation where the rate of interest or any other terms and conditions of any commercial agreement by any nationalized bank are Digitally changed by such regulations of RBI and not the condition of violation of signed by any terms and conditions of existing agreement between the bank and its MUKESH MUKESH KUMAR KUMAR GUPTA GUPTA Date:
2025.11.06 17:09:10 +0530 CS (Comm.) No.555/2018 Guru Nanak International Pvt. Ltd. Vs. Bank of India & Ors. Page no. 69 of 72 customers. The use of the term 'entitled to notify' in Clause 47(a) has to be read in contradistinction to the term 'obligation to notify' which has been consciously excluded from the terms and conditions of agreement Ex.PW1/3 to Ex.PW1/5. This aspect is further fortified from the fact that the bank vide its letter dated 17.10.2016 Ex.PW1/6 has in fact reduced the rate of interest on the basis of the changing internal rating of the plaintiff for the year 2015-16 wherein the rate of interest has been reduced from 15.10% to 13.20% in case of Cash Credit Facility and from 15.60% to 13.70% in case of Term Loan Facility extended to the plaintiff.
Such change and reduction in rate of interest was notified to the plaintiff w.e.f. 28.09.2016 as per RBI guidelines and can be called a notification within the purview eof Clause 47(a), thereby obviating the need for executing afresh agreement. Furthermore, since the transaction between the defendant and plaintiff is commercial in nature and the rights and obligations of each party have been duly laid down in the agreement / sanction letter which does not provide for any show cause notice before charging any penal interest, the statement of DW-1 duly cross examination has to be read with sanction letters Ex. PW-1/3(colly) to Ex.PW1/5 and use of the expression 'generally', which means that it was the discretion of the bank to issue or not to issue notice / intimation to its customers in circumstances as explained above within the purview of the phrase 'entitled to' used in Clause 47(a). It is not the case of the plaintiff that it was only the plaintiff who was excluded from such requirements on account of some malafides or vested interest of a particular bank official. It is not the case of the plaintiff that the defendant No.1 bank has Digitally signed by MUKESH not been cooperating with the plaintiff in operation of its term loan and MUKESH KUMAR KUMAR GUPTA GUPTA Date:
2025.11.06 CS (Comm.) No.555/2018 Guru Nanak International Pvt. Ltd. Vs. Bank of India & Ors. Page no. 70 of 72 17:09:16 +0530 credit facility account. On the contrary, the repeated letters more particularly the much relied letter dated 18.08.2015 Ex. PW-1/13 relied upon by the plaintiff specifically mention the acknowledgment of cooperation by the defendant No.1 bank. Nothing specific regarding requirements of issuance of show cause notice or even instances where such notice has been issued to other customers to the exclusion of the plaintiff has been brought to the notice of the Court by way of any documentary or even any oral evidence. Thus, taken on the yardstick of prepondrance, the stand taken by the plaintiff is also not legally tenable and is liable to be rejected.
51. In view of the aforesaid comprehensive factual and legal discussion and taken on the yardstick of preponderance of probabilities, the plaintiff has failed to prove its entitlement to the suit amount of Rs.40,53,648/- by discharging the onus conferred upon his shoulders. This issue is, accordingly, decided against the plaintiff and in favour of the defendants.
Issue No. 3: "Whether the plaintiff is entitled to the interest, if so, at what rate and for which period ? OPP
52. The onus of proving this issue was also held upon the plaintiff. However, when the plaintiff has failed to prove his entitlement to the suit amount as determined in issue No.2 on the yardstick of preponderance of probabilities, the plaintiff shall not be also entitled to any interest also. Digitally signed by This issue is, accordingly decided against the plaintiff and in favour of MUKESH MUKESH KUMAR KUMAR GUPTA defendant.
GUPTA Date:
2025.11.06 17:09:29 +0530 CS (Comm.) No.555/2018 Guru Nanak International Pvt. Ltd. Vs. Bank of India & Ors. Page no. 71 of 72 (J) CONCLUSION:-
Issue No. 4: "Relief"
53. In view of the aforesaid discussions and findings of the court on the aforesaid issues, the court is of the considered opinion that the plaintiff has not been able to successfully prove its entitlement to recovery of Rs.40,53,648/- as claimed by the plaintiff against the defendants. The suit of the plaintiff is, accordingly dismissed.
54. In the specific facts and circumstances of the case, parties are left to bear their own respective costs.
55. Decree sheet be drawn accordingly.
56. File be consigned to record room after due completion.6 MUKESH Digitally by MUKESH signed KUMAR KUMAR GUPTA PRONOUNCED IN OPEN COURT . GUPTA Date: 2025.11.06 17:09:39 +0530 On this 6th NOVEMBER, 2025 (MUKESH KUMAR GUPTA) DISTRICT JUDGE (COMM. COURT)-07 CENTRAL/DELHI(pk) CS (Comm.) No.555/2018 Guru Nanak International Pvt. Ltd. Vs. Bank of India & Ors. Page no. 72 of 72