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2002 DIGILAW 600 (MAD)

Vilas Bank v. Shreechakra Enterprises

2002-07-11

M.CHOCKALINGAM

body2002
ORDER:- This suit has been filed for a direction to the defendants to pay to the plaintiff a sum of Rs. 1,90,325.50 together with contractual rate of interest at 21% per annum with quarterly rests from the date of plaint till realisation, for a charge decree in case of default, for a personal decree and for costs. 2. Plaint averments are as follows : On behalf of the first defendant, its partners viz. defendants 2 and 3 have approached the plaintiff for Packing Credit Loan. Accordingly, the plaintiff sanctioned the said loan to the tune of Rs.1,50,000/-. The defendants 2 and 3 have borrowed the said loan on 16-2-1990 and jointly executed a promissory note in favour of the plaintiff agreeing to repay the loan together with interest at the contractual rate of 7.58 per annum with quarterly rests. The defendants 2 and 3 have also executed Packing Credit Loan Agreement. They have executed a letter of hypothecation on 16-2-1990. Guaranteeing the due repayment of the loan amount, the 4th defendant has executed a letter of guarantee on 16-2-1990. In respect of the said loan, the defendants are liable to pay interest at the rate of 21% per annum, since the loan availed by them was for the purpose of export business and they misutilised the concession granted by the R. B. I. with quarterly rests. In spite of several requests and demands, the defendants are irregular in the repayment of the said loan. Though the second defendant had confirmed the debit balance on 25-4-1991 and promised to repay the loan amount within a short period, he failed and neglected to pay. The 4th defendant executed a letter on 7-3-1990, evidencing the deposit of the title deeds in respect of his immovable property with an intention to create and equitable mortgage for the due repayment of the sum borrowed by the defendants 1 to 3 together with all interests, costs and other incidental charges. On 6-3-1990 the fourth defendant deposited the title deeds at Madras, and thus create an equitable mortgage on 7-3-1990 at Madras. The plaintiff caused a search to be made for 13 years in the Registrar of Assurances of the Sub-District, in which the mortgaged properties are situated, and they are not aware of any encumbrances on the said property. Hence, the suit has been filed for the above stated reliefs. 3. The plaintiff caused a search to be made for 13 years in the Registrar of Assurances of the Sub-District, in which the mortgaged properties are situated, and they are not aware of any encumbrances on the said property. Hence, the suit has been filed for the above stated reliefs. 3. The defendants 1 to 3 have not filed the written statement. They were called absent and set ex parte. 4. In the written statement filed by the 4th defendant, it is alleged as follows : The loan seems to be mala fide and cheating of the 4th defendant. The lands under security were sold out by the 4th defendant to others on 25-2-1989. He is not a party to the Shreechakra Enterprises and not a partner to the Enterprises. The 2nd defendant colluded with the Bank Manager and played a fraud on the 4th defendant. No Bank Manager and the Field Officer inspected the property under guarantee. Neither the Bank officials nor the second defendant took the signature of the 4th defendant. One Mr. Sundaram, the then VAO of Kesavaraju-kuppam Village took his signature saying that the patta would be changed. He sent a reply dated 14-11-1990 to the notice which was served on his. The 2nd defendant gave a letter that he committed fraud on the 4th defendant and the 4th defendant never received any amount and he is not a guarantor to the loan. The letter dated 13-11-1990 was given to the 4th defendant and also to the Manager of Lakshmi Vilas Bank. Therefore, the 4th defendant is not liable to pay any amount for the loan obtained by the 2nd defendant. Hence, the suit has to be dismissed. 5. On the above pleadings, the following issues were framed : (1) Whether the plaintiff is entitled to get a decree for a sum of Rs. 1,90,325.50 with contractual rate of interest at 21% per annum ? (2) Whether D4 is liable to pay the suit claim? (3) Whether the defendants are liable to pay the suit claim? (4) to what relief? 6. ISSUES 1 TO 4 : The plaintiff bank has filed the civil action for recovery of a sum of Rs.1,90,325.50 together with subsequent interest and to proceed against the property under mortgage, if not paid within the stipulated time. 7. On the side of the plaintiff, P.Ws. 1 and 2 were examined, and Exs. (4) to what relief? 6. ISSUES 1 TO 4 : The plaintiff bank has filed the civil action for recovery of a sum of Rs.1,90,325.50 together with subsequent interest and to proceed against the property under mortgage, if not paid within the stipulated time. 7. On the side of the plaintiff, P.Ws. 1 and 2 were examined, and Exs. P1 to P10 were marked. The contesting 4th defendant has not adduced any evidence. 8. The learned counsel appearing for the plaintiff would submit that in order to prove the claim of the plaintiff, the plaintiff has examined P. Ws. 1 and 2 and marked Exs. P1 to P10; that the defendants 2 and 3 who are the partners of the first defendant firm availed packing credit loan to the tune of Rs. 1,50,000/- on 16-2-1990; that for the said credit facility, the defendants 1 to 3 executed Ex. P1 promissory note and agreed to repay the same with interest at 7.5% per annum with quarterly rests; that they also further agreed if the export did not materialise, the interest shall accrue at the rate of 21% per annum or at clean rate; that they executed a loan agreement under Ex. P2 and letter of hypothecation under Ex. P3 on the same day; that the 4th defendant who stood as guarantor for the said loan, has executed Ex. P4 letter of guarantee on the very same day; that towards the said loan, the 4th defendant had deposited the titled deeds with the plaintiff bank on 6-3-1990 and executed Ex. P5 letter in proof of the deposit of title deeds; that the second defendant has executed Ex. P6 debit confirmation letter on 25-4-1991; that the mortgaged property belonged to the 4th defendant which is shown in the schedule of property annexed to the plaint; that the 4th defendant who has given his immovable property as the security for the loan amount has now come with a false defence stating that he has neither executed the letter of guarantee nor deposited the title deeds, which is thoroughly unfounded and false also; that the plaintiff has issued Ex. P7 legal notice to all the defendants; that the 4th defendant has refused to receive the same; that the returned cover with the said endorsement is marked as Ex. P8; that according to the certified copy of the statement of accounts under Ex. P7 legal notice to all the defendants; that the 4th defendant has refused to receive the same; that the returned cover with the said endorsement is marked as Ex. P8; that according to the certified copy of the statement of accounts under Ex. P9 maintained by the bank, the defendants are liable to pay a sum of Rs.1,90,325.50 on the date of filing of the suit; that from the evidence of P.W. 2, who was the then Manager of the plaintiff bank during the relevant time, it would be abundantly clear that the 4th defendant has executed Ex. P4 letter of guarantee, and he has also deposited the original title deeds with the bank. Added further the learned counsel that out of the total extent of 6 acres and odd, the subject matter of the mortgage, the 4th defendant has sold 70 cents even prior to the deposit of title deeds, but the rest of the property is in tact in the hands of the 4th defendant, and thus the plaintiff has proved its claim and, a decree as prayed for has got to be granted. 9. 9. Countering to the above contentions of the plaintiff’s side, the learned counsel appearing for the 4th defendant would urge that the claim against the 4th defendant is unfounded; that the 4th defendant never executed any guarantee letter nor had he deposited any title deeds in respect of his immovable property; that the 4th defendant is living in a place known as Kesavaraju Kuppam, situate 100 kms away from Madras City; that the 2nd defendant in collusion with the Bank Manager has played fraud on the 4th defendant; that even from the evidence of the bank officials, it would be clear that they never inspected the suit property, and no documents of title were deposited with the plaintiff bank; that the 4th defendant came to know when a notice was served on him, and on receipt of the same, he suitably replied on 14-11-1990 stating that he never stood as a guarantor to the loan nor had he deposited any title deeds; that it is pertinent to note that the plaintiff bank though claimed that it has got a mortgage in its favour by deposit of title deeds, has not produced any title deeds before this Court; that even the bank officials examined could not say whether those documents are available with them; that from the evidence of the bank officials, it would be clear that the 4th defendant did not come to the bank at all to execute any document; that both Exs. P4 and P5 much relied on by the plaintiff bank, are an outcome of the connivance of the village Administrative Officer where the property is situate by forging the signature of the 4th defendant and submitted by the 2nd defendant to the plaintiff bank for obtaining the loan in question; that the 4th defendant has categorically stated that the signatures found in Exs. P4 and P5 were not his signatures; that under such circumstances, a duty is cast upon the plaintiff bank to prove the same, but has thoroughly failed to do so; that when the 4th defendant received the notice on 5-10-1990, he suitably replied the same on 14-11-1990; that the plaintiff bank has suppressed both the notices and reply for the reason that if produced, they will go against the interest of the bank, and since the bank has suppressed the said documents, an adverse inference has got to be drawn against the bank; that out of the total extent of 6.2 acres, even before the alleged sanction, the fourth defendant has sold 70 cents; that P.Ws. 1 and 2 have categorically admitted that they came to know about the sale of a portion of the property measuring 70 cents only subsequent to the mortgage; that the same would clearly reveal that the alleged deposit of title deeds and the creation of an equitable mortgage have not come into existence in the ordinary course of events, as putforth by the plaintiff bank, but under suspicious circumstances, and thus, the plaintiff has not proved either the guarantee or the deposit of title deeds by the fourth defendant, and hence, the suit has got to be dismissed so far as the 4th defendant is concerned. 10. This is a suit filed by the plaintiff bank for recovery of a sum of Rs. 1,90,325.50 with subsequent interest alleging that the first defendant firm having defendants 2 and 3 as its partners, availed a packing loan credit facility to the tune of Rs. 1.50 lacs; and that the said loan facility was extended on the strength of the letter of guarantee and deposit of title deeds by the 4th defendant. The defendants 1 to 3 have not contested the suit. The 4th defendant though contested the suit has confined his defence only to the letter of guarantee and deposit of title deeds and has not questioned the loan transaction between the plaintiff bank and the defendants 1 to 3. According to P.W. 2 Mr. K. S. Jagannathan, who was a Manager of the plaintiff branch during the relevant period, the defendants 1 to 3 have availed the packing loan credit facility to the tune of Rs. 1.50 lacs. The plaintiff bank has filed Ex. P1 promissory note, Ex. P2 loan agreement and Ex. According to P.W. 2 Mr. K. S. Jagannathan, who was a Manager of the plaintiff branch during the relevant period, the defendants 1 to 3 have availed the packing loan credit facility to the tune of Rs. 1.50 lacs. The plaintiff bank has filed Ex. P1 promissory note, Ex. P2 loan agreement and Ex. P3 letter of hypothecation all executed by the defendants 1 to 3 on 16-2-1990. From the documentary evidence, it would be clear that the defendants 1 to 3 for the business purpose of the first defendant firm have availed a packing loan credit facility to the tune of Rs. 1.50 lacs from the plaintiff bank. A pre-suit notice was issued under Ex. P7 dated 15-6-1991. According to P.W. 1, the present Manager, Ex. P9 is the certified copy of the statement of account maintained by the plaintiff bank under the provisions of the Banker’s Books Evidence Act. A perusal of Ex. P9 statement of account would reveal that on the date of filing of the suit, a sum of Rs. 1,90,325.50 was due from the defendants 1 to 3, and thus, in view of the available oral and documentary evidence, there cannot be any difficulty in granting a money decree against the defendants 1 to 3. 11. The plaintiff has specifically averred that on 16-2-1990, the date of Exs. P1 to P3 executed by the defendants 1 to 3, the 4th defendant has also executed letter of guarantee under Ex. P4. The 4th defendant who has contested the suit, in his written statement has averred that he never went to the bank on the said date, nor has he executed Ex. P4 letter of guarantee in favour of the bank on 16-2-1990. In order to prove its case the plaintiff bank has examined P.W. 2, during whose tenure, the loan in question was disbursed to the defendants 1 to 3. It is the evidence of P.W. 2 that the 4th defendant had executed Ex. P4 letter of guarantee in his presence in their office. There is nothing to suspect or to discredit the evidence of P.W. 2 in that regard. It is pertinent to note that the 4th defendant though has filed a written statement, has not examined himself to contradict the plaintiff’s case or to put forth his defence version. P4 letter of guarantee in his presence in their office. There is nothing to suspect or to discredit the evidence of P.W. 2 in that regard. It is pertinent to note that the 4th defendant though has filed a written statement, has not examined himself to contradict the plaintiff’s case or to put forth his defence version. Under the stated circumstances, the Court has to necessarily hold that the 4th defendant has executed Ex. P4 letter of guarantee on 16-2-1990, and on the strength of the same, the plaintiff has sanctioned the loan facility to the defendants 1 to 3, and hence, the 4th defendant is also liable along with the defendants 1 to 3 stated supra. 12. The plaintiff further asked a relief to proceed against the immovable property described in ‘A’ Schedule annexed to the plaint by way of sale and to adjust the sale proceeds towards the decree amount. The plaintiff has specifically averred that the 4th defendant executed a letter on 7-3-1990 evidencing the deposit of title deeds in respect of his immovable property with an intention to create an equitable mortgage for the due repayment of the sum borrowed by the defendants 1 to 3, and he has deposited the title deeds on 6-3-1990 at Madras and has created an equitable mortgage on 7-3-1990 in respect of the ‘A’ Schedule immovable property. The plaintiff has also averred that the cause of action for the suit has arisen on 6-3-1990, when the 4th defendant has deposited the title deeds at Madras and on 7-3-1990 when the 4th defendant had executed a letter, evidencing the deposit of title deeds and created an equitable mortgage in favour of the plaintiff Bank at Madras. At this juncture, the Court may hasten to say that nowhere the plaintiff has averred that the copies of original title deeds were deposited with the plaintiff, but has mentioned in more than one place that there was deposit of title deeds by the 4th defendant. According to the averments in the plaint, the 4th defendant has deposited the title deeds on 6-3-1990, and he has executed Ex. P5 document on 7-3-1990. Admittedly, P.W. 1 was not the Manager of the plaintiff during the relevant period. P.W. 2, who was the Manager of the plaintiff branch during the relevant period, has not deposed that the title deeds were handed over on 6-3-1990, and Ex. P5 document on 7-3-1990. Admittedly, P.W. 1 was not the Manager of the plaintiff during the relevant period. P.W. 2, who was the Manager of the plaintiff branch during the relevant period, has not deposed that the title deeds were handed over on 6-3-1990, and Ex. P5 was executed on 7-3-1990. Contrary to the averments in the plaint, P.W. 2 has stated that the 4th defendant did not submit the original title deeds, but as per the legal opinion, a solemn sworn affidavit was obtained from the 4th defendant. The said affidavit alleged to have been obtained from the 4th defendant is not filed before the Court. Even Ex. P5, which is said to be the letter executed by the 4th defendant on 7-3-90 contains a recital stating that the title deeds enumerated therein were deposited and nowhere recites that copies of the documents were furnished or sworn affidavit was presented to the bank. 13. It is admitted by P.W. 1 that without the original title deeds of a property, they could not accept the same as security, and hence, they obtained all the original title deeds in respect of the mortgaged property from the 4th defendant. But P.W. 2 has come with a contrary evidence to state that the original deeds were not obtained from the 4th defendant, but only an affidavit was obtained. Significant it is to note that at the time of institution of the suit or subsequent thereafter, during the pendency of the suit, the plaintiff bank has not come forward to produce either the original title deeds or the copies thereof. It is a matter of surprise to note that P.W. 1 has stated that he has to ascertain whether the bank has got the original title deeds, but he is certain to state that there was no occasion for the bank to hand over the original title deeds to the 4th defendant. An immovable property viz. a punja land measuring 5.75 acres situated in Kollalakuppan Revenue Village, described in ‘A’ Schedule is shown as the property covered under the equitable mortgage executed in favour of the plaintiff. According to P.W. 2 at the time of sanction of the loan, the mortgaged property had no encumbrance. An immovable property viz. a punja land measuring 5.75 acres situated in Kollalakuppan Revenue Village, described in ‘A’ Schedule is shown as the property covered under the equitable mortgage executed in favour of the plaintiff. According to P.W. 2 at the time of sanction of the loan, the mortgaged property had no encumbrance. P.W. 1 has admitted that the total extent of the property is 6.20 acres; and that a portion of the property measuring 70 cents was sold by the 4th defendant prior to the mortgage. This would be clearly indicative of the fact that the bank officials had not visited the property to be mortgaged prior to the acceptance of the same as security. 14. According to P.W. 1, he did not know whether valuation report was obtained from the valuer in respect of the mortgaged property. Needless to say that the three requisites of a mortgage by deposit of title deeds are : (1) a debt; (2) a deposit of title deeds; and (3) an intention that the deeds shall be security for the debt. In the instant case, the plaintiff has not proved that the 4th defendant ever deposited the title deeds in respect of the properties. The evidence adduced through P.W. 2, who was the Manager during the relevant period, stands contra to the averments made in the plaint and the recitals founds under Ex. P5. In the absence of the necessary proof for the deposit of title deeds, the mere production of Ex. P5 letter would not be sufficient to create an equitable mortgage or to hold that the 4th defendant executed an equitable mortgage by deposit of title deeds in respect of the immovable property. Therefore, the plea of the plaintiff that the 4th defendant executed an equitable mortgage in respect of the plaint schedule mentioned property by deposit of title deeds has got to be rejected. 15. The plaintiff has asked for interest at the rate of 21% per annum on the amount due by the defendants. It is an admitted position that the defendants 1 to 3 have availed the said loan for the purpose of business of the first defendant firm. Considering the transaction between the parties, the Court is of the view that the interest claimed by the plaintiff at 21% per annum is neither excessive nor unreasonable. Therefore, the plaintiff is entitled to interest at 21% per annum. Considering the transaction between the parties, the Court is of the view that the interest claimed by the plaintiff at 21% per annum is neither excessive nor unreasonable. Therefore, the plaintiff is entitled to interest at 21% per annum. All the above issues are answered accordingly. 16. In the result, the plaintiff is given a decree for a sum of Rs. 1,90,325.50 together with future interest at 21% per annum from the date of plaint till realisation and with costs. In other respects, this suit is dismissed.