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2005 DIGILAW 383 (GAU)

State Bank of India v. Solex Custings

2005-05-17

A.B.PAL, R.B.MISRA

body2005
JUDGMENT A.B. Pal, J. 1. The State Bank of India has preferred this appeal against the judgment dated 1.3.1997 passed in Money Suit No. 10 of 1994 by the Civil Judge, Senior Division, North Tripura, Dharmanagar, decreeing the suit of the appellant only for an amount of Rs. 3,82,923.63 against the claim of Rs. 21,28,341.99 which includes principal loan amount and interest thereon calculated upto 30.11.1994. 2. The short facts giving rise to the present controversy are that the first respondent M/s. Solex Castings, a Firm owned by the second respondent Dipak Chandra Roy was registered as a Small Scale Industry (SSI-). The second respondent applied for loan to the appellant-Bank which was duly considered and on 28.12.1982 an amount of Rs. 5,08,000 was sanctioned. On 14.5.1986, the Bank and the second respondent executed an agreement after the credit facility was enhanced to Rs. 9.67 lakh. As per the terms of the agreement, the second respondent placed at the disposal of the appellant-Bank 4 postal assurance policies valued at Rs. 5,000 each and executed other relevant documents. It may be noted here that credit facility was enhanced on the prayer of the second respondent on 16.7.1985, 9.9.1985 and 24.11.1985. When the credit facility was enhanced on 13.5.1986, all the balance amount in the old account was transferred to the new account and documents were executed to cover the enhanced facility. The break up of this enhanced facility as stated in the plaint was Rs. 3.50 lakh on cash credit, Rs. 2.66 lakh on clean cash credit, Rs. 3.01 lakh on term loan and Rs. 0.50 lakh on EFS limit. The third, and fourth respondents being the brothers of the second respondent were the guarantors for the amount of loan sanctioned by the Bank. That apart, vehicle No. TRA-1743 was mortgaged as security by the fourth respondent. The loan was sanctioned to enable the Firm to manufacture Tube well pump, C.I. Soil pipe, Manhole cover, C.I. Cooking pan and for other products of Castings and General engineering. The allegation against the second respondent is that in violation of the terms of agreement he did not pay the loan by instalments and on the contrary open a new account without the knowledge of the appellant in Agartala Branch of the appellant- Bank where the sale proceeds were deposited and from that account he had withdrawn Rs. The allegation against the second respondent is that in violation of the terms of agreement he did not pay the loan by instalments and on the contrary open a new account without the knowledge of the appellant in Agartala Branch of the appellant- Bank where the sale proceeds were deposited and from that account he had withdrawn Rs. 6,53,648 on different dates from 19.7.1989 to 14.8.1991. The failure of the second respondent to repay the loan and interest in terms of the agreement compelled the appellant-Bank to file the money suit for recovery of an accumulated amount of Rs. 21,28,341.99 calculated as on 30.11.1994. 3. The first and second respondents contested the suit by filing a written statement admitting the principal loan amount received by him and the interest thereon upto 30.11.1994 as claimed in the plaint. But they contended that they were not responsible for the failure to repay the said loan which was partly attributable to the Bank itself and mostly attributable to the respondent Nos. 5 and 6, the Director of Industries and the State of Tripura respectively. The grounds of non-payment of the loan amount as advanced in the pleadings, inter alia, are : (i) The State respondents willfully and mischievously deprived the defendant-Firm of its due share as SSI Unit of supplying the materials required by various departments of the State Government; (ii) As the State respondents deprived the Firm of its due share, the plaintiff-Bank should have recovered its dues from the State Government ; (iii) The plaintiff-Bank sanctioned Rs. 5.08 lakh in December 1982, but disbursed the same in April 1984 after a gap of one and a half year. Due to such delay the price of equipments, plants and machineries and raw materials went up taking the cost of whole project beyond financial estimate causing thereby incipient sickness of the Firm for which the Bank was responsible. Because of this delay, the limit of financial assistance had to be increased from 5.08 lakh to 9.67 lakh. (iv) The Resource Division of IFC and PHE Departments of the State Government placed orders worth Rs. 12 lakh to the suppliers outside the State depriving the legitimate claim and expectation of the defendant-Firm. Because of this delay, the limit of financial assistance had to be increased from 5.08 lakh to 9.67 lakh. (iv) The Resource Division of IFC and PHE Departments of the State Government placed orders worth Rs. 12 lakh to the suppliers outside the State depriving the legitimate claim and expectation of the defendant-Firm. This had ruined the prospects of the Unit and snatched away the bread of the workers employed in the Firm ; (v) The Power Department of the State respondents changed specification of the base plates for steel tubular posts. Such change was made in violation of the engineering norms with the motive to deprive the Firm. (vi) The State respondent constituted a committee to enquire into the condition of the Firm and in December, 90, the committee recommended a revaluation package by diversification of the Unit. But the plaintiff-Bank did not come forward with any realistic proposal to revitalise the Firm. 4. Thus, the defendant-Firm and its proprietor made attempts to wash out their hands by shirting the burden and blaming the Bank and the State Government for failure to repay the loan and on the above premises they claimed that the suit of the plaintiff-Bank deserved to be dismissed. 5. The third and fourth respondents who are the guarantors filed separate written statements supporting the stand taken by the first and second respondents, blaming the Bank and the State Government for the Firm's running into limbo and falling sick leading to its failure to repay the loan and interest. They, however, admitted the guarantee given by them by agreement as stated in Annexures 1, 2, 3 and 4 of the plaint, but contended that the Bank and the State Government did not perform their obligations to the Firm though it is an SSI Unit and for that reason re-payment of the loan and the interest cannot be decreed against the respondents. 6. During the course of enquiry, the trial court examined PW 1 on behalf of the Bank and the DW 1 who is the second respondent herein. Five issues were framed, the first three being on the question of maintainability, form non-joinder of parties and cause of action. 6. During the course of enquiry, the trial court examined PW 1 on behalf of the Bank and the DW 1 who is the second respondent herein. Five issues were framed, the first three being on the question of maintainability, form non-joinder of parties and cause of action. All three issues have been answered in the affirmative and thereafter the trial court proceeded with the other two issues regarding entitlement of the Bank to get a decree for recovery of the loan and interest thereon including other related reliefs and costs. 7. We have perused the impugned judgment and felt unhappy for the slipshod approach In the sketchy discussions. Without recording any reason or making any analysis of the evidence, the trial court held that the State Government and the Bank were to be blamed for failure of the defendant-Firm to repay the loan and interest. The court, further observed that the Bank should not have deducted DICIC premium from the accounts of the defendant-Firm. The suit was, thus, decreed only for the principal sum and thereafter deducted the amount of premium realised by the Bank. Thus, only Rs. 3,82,923.63 was decreed in favour of the plaintiff-bank. 8. We have heard Mr. S. Deb, learned senior counsel along with Mr. S.N. Bannerjee, learned advocate for the appellant-Bank and Mr. D. K. Biswas, learned Counsel for the respondent-Firm. 9. The submissions advanced by Mr. Deb are that when the principal sum and the interest thereon have been admitted to be the liability of the respondent-Firm which has failed to repay the same, it cannot be absolved from liability to repay the same only on the ground that there was a delay of one and a half year in disbursement of the principal sum or the departments of the State Government did not place supply orders to the Firm. The Bank is not responsible for the management of the Firm, its production and sale or its diversification which are undoubtedly the concern of the second respondent. Failure on the part of the State respondents to keep its commitment to the respondent- Firm which enjoyed the status of an SSI Unit cannot be an issue for non-payment of the loan and interest due to the Bank. The relation between the Firm and the State Government has nothing to do with the relation between the Bank and the Firm or its proprietor. The relation between the Firm and the State Government has nothing to do with the relation between the Bank and the Firm or its proprietor. The sickness of the Firm, whatever may the grounds therefor, cannot be taken as a valid plea for getting absolved from the liability. There is absolutely no evidence adduced on behalf of the respondent-Firm to show that the appellant-Bank had any role or responsibility for success or failure of the respondent-Firm. The trial court wrongly fastening the Bank with such responsibility denied to decree the total amount claimed by the appellant-Bank. 10. Mr. Biswas, on the other hand, canvassed a different line of submission giving emphasis on the status of the Firm as an SSI Unit which entails certain obligations on the part of the Bank as well as the State Government for industrial development of the State. According to him the second respondent set up the industrial unit only in response to the policy of the State Government for industrialisation and the package of facilities offered thereby. If an industrial unit like the respondent-Firm is set up in anticipation of. true implementation of the Government's declared industrial policy and if the Unit runs into sickness for failure to implement the policies in the right earnest, such industrial unit or its proprietor should not be blamed for failure to pay the loan and the interest. 11. Independent of the impugned judgment and the rival submissions we have carefully examined all the pleadings and the evidence on record. We have noted that, neither in the pleadings of the contesting - respondents (respondent Nos. 5 and 6 have not filed any written statement) nor in the oral testimony and the documents there is anything to show that repayment of the loan and interest by the first and second respondents was conditioned upon and tagged with the performance of any obligation by the Bank or the State Government. Even in the scheme for rejuvenation, there is nothing to show that unless the appellant-Bank had acted for rejuvenation it would not have any right to claim repayment of the loan and interest. Even in the scheme for rejuvenation, there is nothing to show that unless the appellant-Bank had acted for rejuvenation it would not have any right to claim repayment of the loan and interest. In the loan agreement or any other connected documents there is absolutely no stipulation that if the State Government or its departments fail to place supply orders or if they make any change in the specification of any item adversely affecting the business prospects of the Firm the repayment of the loan by the appellant to the Bank would be diminished. We find that the pleadings and evidence on record could not make out any circumstance under which the first four respondents can be absolved from their respective liability to repay the entire dues to the appellant- Bank. 12. In the light of the discussions made above, we are convinced that this is a fit case where the impugned judgment and decree should be interfered with which we hereby do. Accordingly, the impugned judgment and decree are hereby set aside. The suit of the appellant- Bank is decreed in full for the entire amount of Rs. 21,28,341.99 as calculated upto 30.11.1994, which shall be recovered from the first four respondents in accordance with their respective liabilities under the relevant legal provisions. The first and second respondent shall also pay the full cost of the entire proceeding.