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Himachal Pradesh High Court · body

2000 DIGILAW 338 (HP)

CANARA BANK v. SAI BOX FACTORY

2000-12-26

R.L.KHURANA

body2000
JUDGMENT R.L. Khurana, J. :- The plaintiff Bank has filed the present suit under Order 34, Code of Civil Procedure, against the three defendants for the recovery of Rs.7,80,702.08 paise by way of sale/foreclosure of the mortgaged property comprising of land measuring 15 marlas, described as M.I.G. Plot No. 34 in Housing Colony, Una, alongwith the superstructure standing therein. 2. Defendant No.l, Messrs Sai Box Factory is a sole proprietorship concern of which defendant No.2 is the sole proprietor. On the request of defendants 1 and 2, the plaintiff bank granted an open cash credit limit to the tune of Rs.2, 80,000/- in their favour in the year 1989. The facility was availed of by the defendants. On their requests the defendants No. 1 and 2 were also permitted the facility of advance against the supply of bills to the extent of Rs.2,00,000/-. Defendant No.3 stood as guarantor for defendant’s No. 1 and 2 for the repayment of the outstanding amounts of the abovesaid two loan facilities. She also created an equitable mortgage of her land, referred to above, in favour of the plaintiff - bank by depositing the title deeds. The two loan facilities carried interest at the rate of 15.5% per annum with quarterly rests or at such rate(s) as may be varied from time to time. The defendants having availed the facilities, failed to repay the same in accordance with the agreed terms inspite of demands. As on the date of suit, a sum of Rs.7, 80,702.08P was due from the defendants towards the two facilities, which they failed to repay. 3. The suit is being resisted and contested by the defendants. It was pleaded that though the facility of open cash credit limit of Rs.2,80,000/- was sanctioned in their favour on 20.7.1987, the defendants were allowed to avail the same only on 5.8.1989. Due to non-availability of the facility, the defendants could not fulfil their commitments and as a result they had to suffer huge losses. Even in respect of the facility of advance against supply orders, sanctioned in their favour to the extent of Rs.2, 00,000/- the defendants faced the similar difficulties and on account of non- release of advances in time, they further suffered huge losses. Even in respect of the facility of advance against supply orders, sanctioned in their favour to the extent of Rs.2, 00,000/- the defendants faced the similar difficulties and on account of non- release of advances in time, they further suffered huge losses. Insofar as the execution of loan documents are concerned, it was pleaded that the signatures of the defendants were obtained on blank proformae and the blanks were filled in behind their back. Rate of interest as claimed was also denied. It was pleaded that nothing was due from the defendants. 4. On the pleadings of the parties, the following issues were framed on 18.12.1993 and 20.3.2000:- 1. Whether the suit is instituted by a competent person? OPP. 2. Whether there is no privity of contract between defendant No.3 and plaintiff? OPD. 3. Whether the plaintiff is estopped by his own acts, deeds and conduct from filing the present suit? OPD 4. Whether the defendants signatures were procured on die blank printed forms? OH). 5 Whether &e plaintiff has no cause of action and the plaint is liable to be rejected under order 7 rule 11 CPC as alleged? OPD. 6 Whether the plaintiff is entitled to recover the suit amount or any portion thereof, if so, from whom? OPT 7. To what rate to interest the plaintiff bank is entitled to? OPP 7-A.Wheter the suit of the plaintiff is not within time, alleged? OPD 8 Reliefs. 5 Oral as well as documentary evidence has been led by the parties has heard the learned counsel for the parties and has also gone through to record of the case. My findings on the above issues are as under. Issue No. I During the course of hearing the learned counsel for the defendants has readily conceded that the suit has been filed by as competent person for and on behalf of the plaintiff- Bank. The issue is as such decided in favour of the plaintiff-Bank. Issue No. 2: 6. The defendants, including defendant No.3 have, in para-6 of their written statement, admitted that the little-deeds qua her property were deposited by defendant No.3 with he plaintiff-Bank. It has been averred as under:- "That the averments made in para-6 are admitted to the extent that defendant No.3 was pressurised to deposit the title deeds of her property. The defendant’s specifically deny the rate of interest as claimed for by the plaintiff. It has been averred as under:- "That the averments made in para-6 are admitted to the extent that defendant No.3 was pressurised to deposit the title deeds of her property. The defendant’s specifically deny the rate of interest as claimed for by the plaintiff. No compound interest, penal interest or the rate as claimed is chargeable by the plaintiff the plaintiff taking advantage of its position as monopolistic banking company or to strike the defendants and more specifically defendant No.3 in depositing the title deeds with them. The intention to create mortgage was never there." 7. In Para 3 of the preliminary objections, the defendants have pleaded:-"That there is no privity contract between the defendant No.3 and plaintiff. Her signatures me obtained on the forms which were blank on the date when she was made to sign them. Material interpolations had been made in the documents and the alleged contract of guarantee, if any, therefore, stands discharged. Even defendant No.2 was made to sign on documents in the circumstances similar to those in which defendant No.3 was made append her signatures." 8. Defendant No3 has milt stepped into the witness box and depose in support of her case that no document was executed by her in favour of the plaintiff- Bank or that her signatures were obtained on blank proformae or that she was forced and pressurised to deposit die title deeds quo her property. This court in Smt. Garib Devi & Ors v. Mandir Thakur Nar Singh Ji Maharaj 2000(2) Sim. L.J. 1736 following rne ratio laid down by the Honble Supreme Court in Iswar Bhai C. Patel alias Bachu Bhai Patel v. Harihar Behera &Anr. 1999(2) Current Civil Cases 171 has held that if a defendant does not enter the witness box to make a statement on oath in support of the pleadings set out in the written statement, an adverse inference would arise that "what he had stated in the written statement was not correct. 9. In the present case m we! on die failure of the defendant No. 3 to step into the witness box, an adverse inference will have to be drawn against her arid it will have to be presumed that she stood as a guarantor for defendants 1 and 2 and had created an equitable mortgage qua her property in favour of the plaintiff-bank by deposit of title deeds. There is thus privity of contract between her and the plaintiff-Bank. The issue is decided against defendant No.3 Issue No. 4 10. Though it has been pleaded by the defendants that their signatures were obtained on the blank performance of documents, defendant No.2 while appearing as DW 8 has admitted the execution of load documents. He has deposed:- “AH the documents pertaining to the loans were signed by me on one and the same date. I do not remember when the documents were signed by me. I cannot say even roughly." 11. The execution of loan’ documents. Ex. PW 1/E, Ex .PW J/F. Ex. PW 3/5. PW 3/6, PW 3/7 and PW 3/12 have been proved on the record by PW 1 and PW 3. No evidence has been led in the rebuttal by the defendants. On the basis of evidence coming on record it is held that the signatures of the defendants were not obtained on blank proformae. The issue is decided against the defendants. Issue No. 5. 12. The learned counsel for the defendants did not press the present issue during the course of hearing. The same is accordingly decided against the defendants. Issue No.3. 13. In raising the plea of estoppel, the defendants in their written statement vide Para 1 of the preliminary objections have averred:- "That the suit as filed by the plaintiff is not maintainable for the reason that the plaintiff has not disclosed complete facts in the suit. Promises were held out to the defendants which were never fulfilled by the plaintiff. Even after the loan had been sanctioned in the year 1987, the defendants 1 and 2 were not allowed to avail the facility till 1989 for no justifiable cause. The suit of the plaintiff is, therefore, estopped by his own acts, deeds and conduct in filing the suit." 14. The defendants in their written statement vide Para 2 of the reply on merits have further averred:- "That in reply to para-2, the defendants humbly submit that it is correct that defendant-2 is a sole proprietor of defendant-1. However, it is not correct to say that defendant-3 is liable to pay any amount to the bank as alleged. In view of the preliminary objections which have been .taken by the defendants the present suit against the defendants is not maintainable. However, it is not correct to say that defendant-3 is liable to pay any amount to the bank as alleged. In view of the preliminary objections which have been .taken by the defendants the present suit against the defendants is not maintainable. The defendants submit that defendants 1 and 2 had approached the plaintiff for a loan for Rs.3.99 lacs as working capital. But a sum of Rs.50, 000 was allowed to the defendants 1 & 2. The plaintiff has right from the very beginning never fulfilled its promises resulting in huge losses to defendants 1 & 2. Trial production in the unit of defendants 1 & 2 was commenced on 25.8.1987. Defendant-2 approached the bank at a number of occasions and also brought to the notice of the plaintiff that he had ready orders in hand for execution which had been placed by H.P. Horticulture Produce Marketing Corporation Ltd; for corrugated boxes. A sum of Rs.2.80 lacs was asked for on 20.7.1987 which was sanctioned by the Divisional Managers office at Chandigarh on 29.7.1987. Defendant - 2 again approached the bank and requested that this amount be released but the amount was never released to the defendants 1 & 2. HPMC extended the delivery dates for the corrugated boxes till 15.8.1987 whereafter the orders placed on defendants 1 & 2 were cancelled and the security deposit by the defendants 1 & 2 was forfeited, further, defendants 1 & 2 were registered suppliers of J C T Hoshiarpur for supply of corrugated boxes and for this purposes defendants 1 & 2 were required to supply the goods regularly. But since the plaintiff had never allowed defendants 1 & 2 to avail the limit of Rs.2.80 lacs. Even J C T Hoshiarpur withdraw and black- listed the business concern of defendant-2. Similarly the Country Liquor Bottling Plant at Una had placed orders on defendants 1 & 2 but the defendants, as aforesaid, found it difficult to meet their commercial commitments. The net result of the wrongful acts of the plaintiff was that the defendants 1 & 2 suffered loss at every stage. Between 1987 to May, 1989, the defendants approached the plaintiff at its Divisional Office Chandigarh and Branch office at Una on a number of occasions but of no avail. The net result of the wrongful acts of the plaintiff was that the defendants 1 & 2 suffered loss at every stage. Between 1987 to May, 1989, the defendants approached the plaintiff at its Divisional Office Chandigarh and Branch office at Una on a number of occasions but of no avail. Letters were addressed by the second defendant to the Deputy General Manager, Canara Bank, Delhi on 11.1.1998, Director of Industries, General Man-ager, District Industries Centre Una, Managing Director, HPFC, Shimla Divisional Manager, Canara Bank, Chandigarh and Branch Manager, Canara Bank, Una also on 11.1.1988 where the entire state of affairs was brought to the notice. The defendants 1 & 2 were also constrained to ask for no objection certificate from the Branch Manager, Canara Bank so that defendants could approach another nationalised bank for obtaining the requisite financial help. However, instead of doing this a notice was issued by the Bank on 29.1.1988 to the defendants threatening for a legal action for the amount availed off by the defendants 1 & 2. In view of this matter the no objection certificate purportedly issued by the plaintiff was of no meaning since no nationalised bank could extend facilities to defendants 1 & 2. On 13.3.1989 a sum of Rs. 39,000 was allowed to defendants 1 & 2 as the single transaction limit against a firm order which defendants had secured. It was only on 5.8.1989 that the amount of Rs.2.80 lacs was allowed to be availed off by the defendants 1 & 2 which amount; at that stage was hardly of any use to defendants 1 & 2 who had suffered considerable economic loss and damage to their goodwill and standing in the market. The correspondence exchanged with the bank and its various authorities is filed herewith separately. The plaintiff is estopped by his own acts, deeds and conduct from filing the present suit. Further, the amount received by the defendants from the HP Financial Corporation had to be deposited in another bank for the reasons that the plaintiff bank refused to open a no lien account as asked for by the defendants 1 & 2. It was only in December, 1990 that the plaintiff bank allowed the defendants 1 & 2 to operate that account from their branch." 15. It was only in December, 1990 that the plaintiff bank allowed the defendants 1 & 2 to operate that account from their branch." 15. The defendant No. 2 while appearing as DW 8 during the course of cross-examination has categorically admitted that he had applied to the plaintiff bank for the grant of working capital loan to the extent of Rs.3,99,000/-. Such loan was not sanctioned and that loan to the extent of Rs.2, 80,000/- only was sanctioned in the year 1989. In view of such admission by the defendant himself that the loan was sanctioned in 1989, his case set up in the written statement that though loan was sanctioned in the year 1987, he was not allowed to avail the same till 1989 stands belied. 16. Section 115, Evidence Act, 1872, defines "estoppel" as unden-"When one person has, by his declaration, act or omission, intentionally caused or permitted another person to believe a thing to be true and to act upon such belief, neither he nor his representative shall be allowed in any suit or proceeding between himself and such person or his representative, to deny the truth of that thing." 17. In order to bring a case within the scope of "estoppel" as defined in Section 115, quoted above, the following conditions must be fulfilled. In order to bring a case within the scope of "estoppel" as defined in Section 115, quoted above, the following conditions must be fulfilled. (a) There must be representation by a person or his authorised agent to another, in any form - a declaration, act or omission; (b) The representation must have been of the existence of a fact and not of promises "de futuro" or intention which might or might not be enforceable in contract; (c) The representation must have been meant to be relied upon, i.e., it must have been made under circumstances which amounted to an intentional causing or permitting belief in another; (d) There must have been belief on the part of the other party in its truth; (e) There must have been action on the faith of that declaration, act or omission, that is to say, the declaration, act or omission must have actually caused another to act on the faith of it, and to alter" his former position to his prejudice or detriment; (f) The misrepresentation or conduct negligence must have been the promixate cause of leading the other party to act to his prejudice; (g) The person claiming the benefit of an estoppel must show that he was not aware of the true state of things. If Sue was aware of the real state of affairs or had means of knowledge, there can be no estoppel. 18. Neither the pleadings in the present case nor the evidence coming on the record make out a case of estoppel against Ae plaintiff- bank. 19. By way of the amended written statement the following additional plea as to estoppel was raised on behalf of the defendants vide Para 7 of the preliminary objections:- "That the plaintiff is estopped by his own acts, deeds, conducts and acquiescence in instituting the present suit The defendants had instituted CWP No. 244/92 titled Ajay Dubey versus HP financial Corporation and another, in which the defendants inter alia had sought directions for rehabilitation of the industrial unit Tic matter was referred to the State-level Institutional Committee for considering the proposal for rehabilitation. In the meeting of Sub Committee held on 11.5.1994, in which Shri Narain Singh Kapur, Branch Manager of Canara Bank Una was present, it was inter alia recommended and decided that the bank would consider financing working capital of the defendants unit if the Financial Corporation decides to grant additional funds. The HP Financial Corporation has since prepared detailed rehabilitation package/proposal but the plaintiff-bank contrary to the assurances held by it, have not taken any action in the matter. The suit therefore, deserves to be dismissed on this ground alone. The Plaintiff is duty bound to implement the rehabilitation proposal as assured Tine plaintiff cannot take advantage of its own lapses and jeopardise the right of the defendants." 20. Admittedly, the plaintiff bank was mot a party to the writ petition being CWP No.244/92 filed by the defendant iBia2 in which direction was issued for rehabilitation of the industrial unit 21. The pleadings set out in the amendment written statement as well as the evidence coming on record do not make mm. at case of estoppel against the plaintiff bank. 22. Be it stated that after the amended the written statement, one additional issue was framed on 9.12.1996 to the fallowing effect:- “Whether the plaintiff is estopped from filing the suit?" 23. The above issue is redundant in view of the present issue No.3 as framed and under consideration. 24. A contention was raised on behalf of the defendants that in addition to the other documents executed in respect of the two loan facilities, the plaintiff bulk also obtained an unrevocable general power of attorney Ex. PW 3/16 from the defendants whereby it wa? authorised to recover dues from third parties on behalf of the defendants and to adjust such dues after recovery towards the loans. Since the plaintiff bank failed to recover such dues on the basis of the power of attorney, it is estopped from recovering the suit amount. 25. Suffice to say that no such pleading was raised by the defendants in their written statement. Since the plaintiff bank failed to recover such dues on the basis of the power of attorney, it is estopped from recovering the suit amount. 25. Suffice to say that no such pleading was raised by the defendants in their written statement. Rule 2 of Order 8, Code of Civil Procedure, enjoins the defendants to raise by their pleadings all matters which show that the suit to be not maintainable, or that the transaction is either void or avoidable in point of law, and all such grounds of defence as, if not raised, would be likely to take the opposite party by surprise, or would raise issues of fact nor arising out of plaint as, for instance, fraud, limitation, release, payment, performance, or facts showing illegality. 26. A question of estoppel is a mixed question of law and facts and without definite allegations in the pleadings; a party cannot be permitted to resort to the plea of estoppel. 27. In Kishori Lal v. Mt. Chaltibai AIR 1959 SC 504, it has been held that a defendant, who has set up a particular case of estoppel in his written statement, cannot be allowed to set up a case different to his case in the written statement. 28. Following the above ratio the defendants cannot be permitted to set up a case of estoppel different from the one in the written statement. Even otherwise, there is nothing in the evidence to show that while obtaining the irrevocable power of attorney Ex. PW 3/16 any assurance or representation was made by the plaintiff bank that no steps for the recover-) of the outstanding amounts from third parties are to be taken by the defendants and that it would be only the plaintiff bank entitled to do so. Inspite of the power of attorney Ex. PW 3/16 the defendants as principals could have recovered the amounts from the third parties. Mere failure on the part of the plaintiff bank would not amount to estoppel. It is, accordingly, held that the plaintiff bank is not estopped from claiming the outstanding amount from the defendants. The issue is decided against the defendants. Issue No. 7. 29. PW 3/16 the defendants as principals could have recovered the amounts from the third parties. Mere failure on the part of the plaintiff bank would not amount to estoppel. It is, accordingly, held that the plaintiff bank is not estopped from claiming the outstanding amount from the defendants. The issue is decided against the defendants. Issue No. 7. 29. As per the documents proved to have been executed by the defendants, interest in respect of the two loans was agreed to be paid at the rate of 15-1/2% per annum with quarterly rests or at the rate(s) as the Bank may from time to time specify by notice in writing. 30. Nothing has come on the record to show that the rate of interest was changed/revised by the plaintiff bank by giving a notice in writing to the defendants. Therefore, in the absence of evidence as to any upward revision in the rate(s) of interest, the plaintiff bank is entitled to interest at the rate of 15-1/2% per annum with quarterly rests. The issue is accordingly decided. Issue No.6. 31. Ex. PW 1/B is the statement of account in respect of the loan granted to the defendants, in the form of open cash credit facility. As per this statement, a sum of Rs.5, 87,472.08 paise was due from the defendants in respect of this loan as on the date of suit that is 11.9.1992. 32. Ex .PW 1/C is the statement of account in respect of the loan facility termed as advance agreement supply of bills. As per this account a sum of Rs. 1, 93,230/- was due from the defendants as on the date of suit. 33. Thus, a total sum of Rs.7, 80,702.08 paise was due from the defendants. It is not the case of the defendants that the entire amount has been repaid. The defendants in para 9 of their written statement while disputing the correctness of the suit amount, have pleaded that the "plaintiff is liable and responsible for the losses which have been caused to the defendants for having caused loss in business and also in business reputation. No amount is due and payable to the plaintiffs" 34. Be it stated that no specific case of set off within the meaning of Order 8 rule 6, Code of Civil Procedure, has been set up by the defendants. No amount is due and payable to the plaintiffs" 34. Be it stated that no specific case of set off within the meaning of Order 8 rule 6, Code of Civil Procedure, has been set up by the defendants. Therefore, in the absence of evidence as to repayment of the loan amounts, the plaintiff bank is entitled to the amount claimed in the suit The issue is decided in favour of the plaintiff bank. Issue No. 7-A. 35. Equitable mortgage in the present case was created on 9.9.1989 by way of deposit of title deeds as is evident from Ex .PW 3/12, the letter from defendant No.3 evidencing the deposit of title deeds. The suit has been filed on 11.9.1992. The present suit is the one under Order 34, Code of Civil Procedure for enforcing the payment of debt secured by a mortgage and as such would be governed by Article 62, Limitation Act, 1963 wherein a period of limitation Act, 1963 wherein a period of limitation of twelve years has been prescribed. (See: Mrs. Rosy George v. State Bank of India & Ors AIR 1993 Kerala 184; Central Distillery and Chemical Works Ltd. v. Gurbharatjeet Singh & Ors., AIR 1993 P & H 25 and Manoj Kumar Saha & Anr v. Nabadwip Chandra Poddar & Anr. AIR 1978 Calcutta 111). 36. The present suit having been filed within twelve years of the creation of equitable mortgage is, therefore, within time. The issue is decided against the defendants. Relief. 37. As a result, a preliminary decree, under Order 34, rule 2 read with rule 4, Code of Civil Procedure, for a sum of Rs.7, 80,702.08 paise with cost is passed in favour of the plaintiff bank and against defendant’s No. 1 to 3 jointly and severally. 38. In so far as the question of grant of pendente lite and future interest is concerned, the Honble Supreme Court in N.M. Veerappa v. Canara Bank & Ors., 1998(1) S.L.J. 512, that the provision contained is Section 34, Code of Civil Procedure, are not applicable to the suits filed under Order 34 Code of Civil Procedure and that the grant of interest in such cases shall be governed by rule 11 of the said Order. It has further been held that under Order 34 Rule 11, it is not obligatory on the part of the Court while passing a preliminary decree to require payment at the contractual rate of interest from the date of suit till the date fixed in the preliminary decree for payment of the amount. Discretion is vested in the Court so far as pendente lite and subsequent interest is concerned. 39. On the facts and in the circumstances of the case and following the ratio laid down by the Honble Supreme Court in the above referred to case, the plaintiff Bank is allowed pendente lite and future interest on the decretal amount, which is taken as principal amount, at the simple rate of 15-1/2% per annum from the date of suit, that is 11.9.1992 till 30.6.2001 or actual date of payment, whichever is earlier. It is, therefore, directed that:- (a) The defendants shall pay into the court the amount as under by 30.6.2001:- (i) Principal amount of Rs.7, 80,702.08 paise; and (ii)Costs of the suit, as determined/assessed in the preliminary decree; and (iii)The amount of pendente lite and future interest at the simple rate of 15-1/2% per annum on the principal amount as at (i) above from the date of suit, that is, 11.9.1992 till the date of payment or 30.6.2001, whichever is earlier; (b) On the amount being so paid by the defendants 1 to 3, the plaintiff-Bank shall deliver up to the defendants or their authorised agent, all documents in its possession or power relating to the mortgaged land, and the plaintiff Bank shall, if so required, retransfer the mortgage land to the defendant No.3 at her cost free from mortgage and from all encumbrances, if any, created by the plaintiff Bank or any person claiming under it and also if necessary, put the defendant No. 3 in possession of such land. (c) If payment of the amounts as determined and directed to be paid under (a) above is not made by the defendants on or before the date fixed above, the plaintiff Bank shall be entitled to apply for a final decree debarring the defendants from all right to redeem the mortgaged land and while doing so the plaintiff-Bank may also apply for grant of interest for period after 30.6.2001 upto the, date of actual realisation of the amount as provided for under clause (b) of rule,.. 11 of Order 34, Code of Civil Procedure.