Varghese v. Dhanalakshmi Bank Ltd. — 1997 DIGILAW 122 (KER)

Judgment :- Ramachandran, J. This appeal arises from the judgment and decree of the second Additional Sub Judge of Trichur in O.S. No. 204/85. 2. The appellants were the defendants in O.S. No. 204/85 before the Sub Court of Trichur. The respondent herein is the Dhanalakshmi Bank Ltd. and it had filed the suit as plaintiff for realisation of the amount due from the defendants. The facts are that the plaintiff bank had sanctioned a term loan to the defendants for a sum of Rs. 30,000/- for a period of five months repayable with interest at 16.15% per annum on 6.2.1981. The defendants availed of the loan on 18.2.1981 and they executed and delivered a demand promissory note for a sum of Rs. 30,000/- undertaking to repay the said amount with interest with quarterly rests. The loan was availed for commercial purposes by the defendants. The second defendant had mortgaged his properties by deposit of title deeds and had also executed a memorandum creating equitable mortgage. On 24.9.1982, a sum of Rs. 3,510/- and on 10.9.1983, a sum of Rs. 10,000/-were received through Chelakkara Service Co-operative Bank on behalf of the defendants. The balance amount was not repaid even after sending a notice on 20.10.1982. On 25.1.1984, the defendants acknowledged the liability in writing. Later the plaintiff Bank issued notice to the defendants on 12.10.1984. The plaintiff prayed for a decree for realisation of Rs. 48,744.95 with interest at 18% per annum on 47,480.90 from 1.4.1985 till realisation and with costs. There was a prayer for sale of the mortgaged property shown in the plaint. The defendants contended before the trial court that the Bank was not properly represented and that the suit was not maintainable. They denied execution of the letter of acknowledgement. Thus, according to them, the suit was barred by limitation. It was contended that the loan was granted on the undertaking given by the Chelakkara Service Co-operative Society and the stipulation was to pay the sale proceeds of cashew nuts supplied by the defendants to the society. Thus, according to the defendants, they had sold 5,302.500 Kgs. of cashew nuts to the aforesaid Society on 6.4.1981 and its value of Rs. 41,359.50 was received by the society for payment of the same to the Bank towards the loan transaction. According to the defendants they had supplied cashew nuts to the society on 23.4.1981,25.4.1981 and 15.5.1981. Thus, according to the defendants, they had sold 5,302.500 Kgs. of cashew nuts to the aforesaid Society on 6.4.1981 and its value of Rs. 41,359.50 was received by the society for payment of the same to the Bank towards the loan transaction. According to the defendants they had supplied cashew nuts to the society on 23.4.1981,25.4.1981 and 15.5.1981. They contended that the suit was bad for non joinder of Chelakkara Service Co-operative Society. Thus, they contended that the plaintiff was not entitled to get a decree without impleading the society. 3, After framing necessary issues the trial court examined PWs.1 to 4 and Dws.1 and 2 and marked Exts. Al to A18, B1 to B4 and XI to X5. After hearing both sides the lower court considered the matter and held that the Chelakkara Service Co-operative Society was not a necessary party and that hence the suit was not bad for non joinder of necessary parties. The lower Court held that the suit was not barred by limitation in view of the acknowledgement evidenced by Ext. A4. It was held that there was no valid contract between the plaintiff and the Chelakkara Service Co-operative Society, and that there was no validity for the undertaking given by the Secretary. The lower court held that even though the Society was not a necessary party it was a proper party. It was found that the plaintiff Bank was properly represented in the suit. It was held that the plaintiff was entitled to get the amount as prayed for with interest only at the rate of 16.15% per annum with quarterly rests. Thus, the suit was decreed as prayed for showing interest at 16.15% per annum. Aggrieved by that judgment and decree the defendants had filed this appeal. 4. Counsel for both sides were heard. According to the learned counsel appearing for the appellants Ext. A4 acknowledgement was not correct and that the suit was barred by limitation. It was also contended that the suit was bad for non joinder of Chelakkara Service Co-operative Society. Thus the points arising for consideration are: (1) whether the suit was barred by limitation and whether Ext. A4 acknowledgement was signed by the defendants as alleged and (2) Whether the suit was bad for non-joinder of necessary parties. 5. Point No. 1: For the purpose of advancing loan from the respondent Bank the defendants executed Ext. Thus the points arising for consideration are: (1) whether the suit was barred by limitation and whether Ext. A4 acknowledgement was signed by the defendants as alleged and (2) Whether the suit was bad for non-joinder of necessary parties. 5. Point No. 1: For the purpose of advancing loan from the respondent Bank the defendants executed Ext. Al promote on 18.2.1981. They executed Ext. A2 memorandum of deposit of title deeds. Exts. A3 series were the title deeds in favour of the second defendant and an equitable mortgage was created regarding those properties by the second defendant as per Ext. A2. Thus loan was. sanctioned as per a term loan for the sum of Rs. 30.000/- for a period of five months repayable with interest at 16.15% per annum. Thus loan was sanctioned on 16.2.1981 and the defendants availed of the loan on 18.2.1981. The loan was sanctioned as per Ext. A9 letter dated 16.2.1981 given by Chelakkara Service Co-operative Society to the respondent Bank Ext. A9 was signed by the Secretary of the Society by name Balakrishnan. He undertook to pay the loan by the defendants to the Bank. The understanding was that the Chelakkara Service Cooperative Society would be collecting cashew nuts from the defendants and payments will be made towards the loan transaction on behalf of the defendants. Thus, an amount of Rs. 3,510/- was paid through the Society on 24.9.1982 and an amount of Rs. 10,000/- as paid on 10.9-1983, through the said society. These amounts are credited by the Bank and the balance amount is claimed in the plaint. As the suit was not filed within the period of three years the plaintiff Bank relied on Ext. A4 letter of acknowledgement signed by the defendants on 25.1.1984. Thus, according to the Bank, the limitation is saved in view of this acknowledgement. But the defendants denied the signature in Ext. A4 acknowledgement. PW.1 to PW. 4 were examined on the side of the plaintiff Bank before the trial Court. PW.1 was the Manager of Kumaranelloor Branch near Wadakkancherry on 20.4.1985. The loan was sanctioned from the Kumar anelloor Branch of Dhanalakshmi Bank. He proved the execution of Ext. Al pronote and Ext. A2 memorandum of deposit of title deeds. PW.1 deposed that Exts. A3 series were the title deeds deposited by the second defendant. PW.1 proved Ext. A4 acknowledgement of liability dated 25.1.1984. PW.1 proved Ext. The loan was sanctioned from the Kumar anelloor Branch of Dhanalakshmi Bank. He proved the execution of Ext. Al pronote and Ext. A2 memorandum of deposit of title deeds. PW.1 deposed that Exts. A3 series were the title deeds deposited by the second defendant. PW.1 proved Ext. A4 acknowledgement of liability dated 25.1.1984. PW.1 proved Ext. A5 which is a copy of the notice sent by the Bank in the year 1982. He proved Ext. A6 series which are the acknowledgement of the defendants for receipt of the notice. PW.1 proved Ext. A7 as the extract of the loan ledger copy in the names of the defendants. PW.1 deposed that only two payments were made through the Society by the defendants. He proved Ext. A8 which was an authorisation letter enabling the manager to file the suit on behalf of Dhanalakshmi Bank. PW.1 stated that the society had not given any undertaking letter and that Ext. A9 was the letter signed by the General Secretary of the Society. He further deposed that Ext. A9 would not constitute an undertaking and that there is a specific form for giving undertaking. He proved Ext. A10 notice and Ext. All acknowledgement. PW.1 deposed that there was no reply from the first defendant for Ext. A10 notice. According to PW.1 there was no direction to the defendants to pay the amount only through the Service Co-operative Society of Chelakkara. Ext. A12 was a copy of the letter sent by the plaintiff Bank to the Registrar of Co-operative Societies. Then PW.1 received Exts. Al 3 reply from the Joint Registrar of Co-operative Societies stating that the matter will be enquired into by the Assistant Registrar. Later PW 1 received Ext. A14 letter stating that the society had not undertaken to repay the loan on behalf of the defendants. He proved Ext. A15 letter from Chelakkara Service Co-operative Society stating that the Society had not undertaken to repay the loan on behalf of the defendants. PW. 2 Raveendran was the Branch Manager of Kumaranelloor Branch of Dhanalakshmi Bank during 1981-82. The loan was sanctioned to the first defendant at the time when PW. 2 was the Branch Manager. Thus, he proved Exts. Al to A3 series. PW. 3 Rajan was the Branch Manager of Kumaranelloor Branch of Dhanalakshmi Bank in January 1984. Ext. A4 acknowledgement was signed by the defendants in the presence of PW. 3. The loan was sanctioned to the first defendant at the time when PW. 2 was the Branch Manager. Thus, he proved Exts. Al to A3 series. PW. 3 Rajan was the Branch Manager of Kumaranelloor Branch of Dhanalakshmi Bank in January 1984. Ext. A4 acknowledgement was signed by the defendants in the presence of PW. 3. PW. 3 deposed that the two defendants came to the Bank and signed in Ext. A4 letter. But PW. 3 deposed that there was difference in the signature of the defendants in Exts. Al and A4. This is so stated by him at page 2 of his deposition. According to PW. 3 he did not verify the signature in Ext. Al at the time of getting the signature in Ext. A4. Thus, it was clear that the defendants did not put proper signature in Ext. A4 while they signed in the presence of PW. 3. The evidence of PW. 3 proved that the defendants signed in Ext. A4 in his presence as alleged. PW. 4 Ranganathan was the Manager of Kumaranelloor Branch of Dhanalakshmi Bank on 9.11.1988. He proved Ext. A16 sanction letter. He proved Exts. A17 and A18 chalans showing the repayments. Thus, the evidence of PWs.1 and 3 proved the acknowledgement. It is further to be noted that an equitable mortgage was created by the defendants for the purpose of repayment of the loan. Thus, there is no limitation for filing the suit as it was filed within the period of limitation. Thus, the point is answered in favour of the respondent. 6. Point No. 2: The learned counsel appearing for the appellant submitted that the Chelakkara Service Co-operative Society was a necessary party and that as it was not impleaded before the lower court even after giving an opportunity, the suit is bad for non joinder of necessary parties. It is to be noted that Chelakkara Service Co-operative Society is to be impleaded only if it is a necessary party. On the basis of Exts. A9 and A12 letters the learned counsel appearing for the appellant submitted that Chelakkara Service Co-operative Society had given an undertaking for repayment of the loan and that hence as the first defendant had supplied cashew nuts, to the said society, it was the duty of the Society to pay the amount to the respondent Bank. Exts. A9 and A12 letters the learned counsel appearing for the appellant submitted that Chelakkara Service Co-operative Society had given an undertaking for repayment of the loan and that hence as the first defendant had supplied cashew nuts, to the said society, it was the duty of the Society to pay the amount to the respondent Bank. Exts. B1 to B4 show that the first defendant had supplied cashew nuts to the society. Similarly, Exts. XI to X5 also show that cashew nuts were supplied to the society. But except one bill all the other bills showed the endorsement that cash was paid. It is to be noticed that there was no contract between the respondent Bank and the Chelakkara Service Co-operative Society. Further Exts. A14 and A15 show that the Secretary of the Society was not authorised by the Board to give an undertaking. Thus, it is clear that the undertaking given by the then secretary Balakrishnan who was dismissed later was not binding on the Society. Further as the suit was based on Exts. Al and A2 to which the society was not a party, there was no necessity to implead the Society in the suit. The learned counsel appearing for the appellants cited the decision reported in AIR 1933 Madras 664 (Subbaraya Sastri v. Mukkamala Seetha Ramaswami ). There was held that the suit itself should be dismissed if the necessary party is not impleaded inspite of objection taken from the beginning. That decision is not applicable to the facts of the present case. In that decision, the suit was for ejectment of the property and for removal of pial erected therein, where the defendant contended mat the site belonged to the Municipality and permission was obtained from the Municipality for erection of pial. Then the Madras High Court held that the Municipality was a necessary party and as it was not impleaded the suit should be dismissed for non-joinder of necessary parties. In the present case, as I stated earlier, the Society is not a necessary party. Another decision cited by the learned counsel was as reported in 1988 (2) KLT 659 (Abraham v. Chandi rosamma ). In that decision this Court held that in a suit for specific performance the second defendant who was the wife of the first defendant) claiming tenancy right under an alleged rent deed from the first defendant was a necessary party. Another decision cited by the learned counsel was as reported in 1988 (2) KLT 659 (Abraham v. Chandi rosamma ). In that decision this Court held that in a suit for specific performance the second defendant who was the wife of the first defendant) claiming tenancy right under an alleged rent deed from the first defendant was a necessary party. In that decision, it was held that even if a person is not a necessary party he can be impleaded as a proper party to avoid multiplicity of suits. It is to be noted that the plaintiff had no prayer against the society in this suit and even if a decree is passed, the said society is not affected by it. Thus, the decision cited is not applicable to the facts of the present case. The learned counsel drew my attention to S.127 of the Indian Contract Act which dealt with the liability of the surety. Thus, according to learned counsel the Society was a surety and as such it was a necessary party. As cited easier, the Society did not stand as surety, but a letter of undertaking was given only by its Secretary individually which was not binding on the society. Thus, it cannot be said that the Society was a surety for the loan given by the respondent Bank. At best it can only be stated that the respondent Bank was prompted to advance the loan on the letter of undertaking given by the then Secretary of the Society., That did not mean that the society was a surety for the loan. Another contention was that the appellants may have to proceed against the society and that as such the society is a proper party in this suit. It was also argued that the remedy against the society may get barred if the society is not impleaded in the suit. Nothing stood in the way of the appellants from proceeding against the Society, if so advised. Thus, it is futile to contend that the society is to be impleaded as a party to the present suit. In the light of the provision under S.128 of the Indian Contract Act it was argued that the liability of the surety is co-extensive with that of principal debtor. I fully agree with this proposition of law. Thus, it is futile to contend that the society is to be impleaded as a party to the present suit. In the light of the provision under S.128 of the Indian Contract Act it was argued that the liability of the surety is co-extensive with that of principal debtor. I fully agree with this proposition of law. The learned counsel appearing for the respondent cited the decision reported in 1987 (2) KLT 132 (National Spices v. Andhra Bank). There the test for impleading a new party to a suit was laid down. In that decision, this court clearly laid down that the person sought to be added should have a direct interest as distinguished from a commercial interest in the subject matter of litigation. In the present case, it cannot be stated that the Society has any direct interest in the subject matter of litigation. In the decision reported 1985 KLT Short notes 57 (George v. Bank of Madurai Ltd.) this court held that adding of a party can be made only if it is found necessary for the effective adjudication of the real controversy between the parties and that justice cannot be done without he being in the party array. In a suit for recovery of loan advanced by sale of mortgaged properties which included the establishment where workers are engaged, this court held in the decision reported in 1991 (1) KLT 573 (Kassim v. South Indian Bank Ltd.) that the workers of the establishment cannot be impleaded in the suit. The Full Bench of the Rajasthan High Court held in the decision reported in AIR 1970 Rajasthan 167 (Hardeva v. Ismail) that to be a necessary party the person must be having a right to some relief against such party in respect of such matter involved in proceedings in question and it should not be possible to pass effective decree in the absence of such a party. In the present case, the decree can be passed without the junction of the Chelakkara Service Co-operative Society. Thus, the said Society is not a necessary party. For the above reasons, confirming the judgment and decree of the lower court and this appeal is dismissed with costs.