Research › Search › Judgment

Kerala High Court · body

2003 DIGILAW 72 (KER)

Syndicate Bank v. K. Manohara

2003-01-28

A.LEKSHMIKUTTY

body2003
Judgement JUDGMENT :- Against the judgment and decree passed in O.S. No. 39/1990 on the file of the Sub-Court, Kasaragod, this appeal is filed by the plaintiff. The plaintiff filed the suit for recovery of money. An amount of Rs. 25,000/- advanced by the plaintiff to the first defendant and the second defendant was the surety. On the date of advancement of money, the defendants have jointly executed a memorandum of agreement in favour of the plaintiff agreeing to repay the amount with interest at 12% per annum with the compound interest with quarterly rests. As per the agreement, the amount has to be repaid in monthly instalments of Rs. 325/- from 12-10-1984 and the last instalment was due on 12-2-1991. The said amount was borrowed by the first defendant for business purposes. The first defendant had hypothecated the goods and the machinery which is described as B schedule in the plaint. The defendants further agreed to pay overdue interest at 12.5% per annum. An amount of Rs. 36,621/-is due from the defendants. Hence the suit is filed for recovery of the said amount. 2. The first defendant remained ex parte and the second defendant alone filed a written statement contending that the suit is filed without any bona fides. The second defendant has no connection with the loan transaction. The loan was granted to the first defendant under the scheme for providing loan to self-employment of un-employed educated youth. There is a circular from the Reserve Bank of India to the effect that the person who availed loan alone is liable to pay the amount. The assets purchased out of the Bank finance alone will be the security for advancement of the loan. So the plaintiff has no authority to proceed against the second defendant. The first defendant is conducting a shop by name "Sithara". He has also in exclusive possession of 95 cents of property in R.S. No. 59/13 in Edanad village besides his joint property in Arikkady. He denied the execution of agreement in favour of the plaintiff for the loan of Rs. 25,000/-. There was no agreement to pay interest also. The documents produced by the plaintiff are not binding on him. The suit is barred by limitation. 3. On the basis of the pleadings the Court below raised three issues. The evidence in the case consists of the oral testimony of P.Ws. 25,000/-. There was no agreement to pay interest also. The documents produced by the plaintiff are not binding on him. The suit is barred by limitation. 3. On the basis of the pleadings the Court below raised three issues. The evidence in the case consists of the oral testimony of P.Ws. 1 and 2 and Exts. A1 to A14, Ext. B1. The Court below after appreciation of the evidence decreed the suit against the first defendant alone and dismissed against the second defendant. Against the said judgment and decree this appeal is preferred by the plaintiff. 4. The case of the plaintiff is that the first defendant borrowed an amount of Rs. 25,000/- from the plaintiff Bank and the second defendant was the surety of the loan transaction. Ext. A1 is the agreement executed by the defendants to the plaintiff and Ext. A2 series are the stamped receipts for Rs. 11405.85 dated 12-4-1984, Rs. 6500/- dated 16-4-1984, Rs. 4000/- dated 28-4-1984 and Rs. 3454.15 dated 15-5-1984. With regard to the plaint transaction P.Ws. 1 and 2 gave evidence. Their evidence would show that these documents were executed by the defendants in favour of the plaintiff. Ext. A3 is the deed of hypothecation executed and Ext. A4 is the list of stock in the trade executed by the first defendant to the plaintiff. The second defendant denied the transaction. His contention is that he never executed any document in favour of the plaintiff and he never stood as a surety to the loan transaction. Exts. A1 and A2 series along with the evidence of witnesses would clearly show that the agreements were executed jointly by defendants 1 and 2. Admittedly a loan of Rs. 25,000/- was sanctioned to the first defendant under the scheme for providing loan to self-employment to unemployed educated youth. The contention of the second defendant is that as per the Circular issued by Reserve Bank of India it is specifically stated that the person, who availed loan alone is liable to pay the amount. Ext. B1 is the scheme for providing self-employment to educated unemployed youth. As per Clause (k) "the Bank shall not ask for owner's contribution in the form of margin money or seek collateral security or third party guarantee for the loan. Ext. B1 is the scheme for providing self-employment to educated unemployed youth. As per Clause (k) "the Bank shall not ask for owner's contribution in the form of margin money or seek collateral security or third party guarantee for the loan. The security for the Bank will be the asset created out of the Bank finance." So according to the 2nd defendant there is no question of any guarantee for the loan advanced to the first defendant. It is true that such a clause is in the scheme. But it does not mean that if anybody volunteers as surety it is to be refused. Exts. A1 and A2 series were seen jointly executed by defendants 1 and 2 thereby undertook to repay the amount in instalments with interest. Since the agreement is executed by defendants 1 and 2, the second defendant is estopped from contending otherwise. The execution of Exts. A1 and A2 are proved through the oral evidence of P.Ws. 1 and 2. The Court below found that even if Ext. A1 document was executed voluntarily by the second defendant, it is against the Circular of the Reserve Bank of India which is statutory in nature and it cannot be enforced. According to the lower Court, the Circular issued by the Reserve Bank of India is having a source of statutory nature and if any agreement is executed against the circular, it is forbidden by law and it cannot be allowed to be in force in such circumstances. I am not in agreement with the reasoning given by the Court below. What is stated in the scheme is that the Bank shall not ask for owner's contribution in the form of margin money or seek collateral security or third party guarantee for the loan. That doesn't mean that if anybody voluntarily agrees to repay the amounts, it should be refused. Since the execution of Exts. A1 and A2 series are proved by the plaintiff, it is to be found that the second defendant is jointly liable to repay the amount advanced to the 1st defendant as per Exts. A1 and A2 series. The first defendant has no case that the averments in the plaint is not correct. As per Ext. A1 executed by the defendant in favour of the plaintiff, both the defendants are jointly and severally liable for repayment of the loan amount. A1 and A2 series. The first defendant has no case that the averments in the plaint is not correct. As per Ext. A1 executed by the defendant in favour of the plaintiff, both the defendants are jointly and severally liable for repayment of the loan amount. The 2nd defendant had stood as a guarantor to the loan. So he is estopped from contending otherwise. 5. In such circumstances, I am constrained to set aside the dismissal of the suit against the second defendant. The judgment is modified and the plaintiff is allowed to recover the amount from the defendants and they are jointly and severally liable for the amount and a decree is passed allowing the plaintiff to recover Rs. 36,621/- from the defendants and B schedule properties with 10% interest from the date of suit till realisation together with costs. The appeal suit is allowed. Appeal allowed.