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Jharkhand High Court · body

2007 DIGILAW 663 (JHR)

Adarsh Paper Board Co. Pvt. Ltd. v. Bank Of India

2007-08-17

DABBIRU GANESHRAO PATNAIK

body2007
JUDGMENT D.G.R. Patnaik, J. 1. This appeal is directed against the judgment dated 21.7.1997 and its corresponding decree dated 4.8.1997 passed by the Sub Judge-II, Seraikella in Money Suit No. 5 of 1990, whereby the suit was decreed in favour of the plaintiff and against the defendants. 2. The suit was filed by the plaintiff / respondent against the pro forma respondent Nos. 2 to 5 and against the present appellants 1 to 5 for a decree for realizing a sum of Rs. 6,72,105.73 paise together with pendente lite and future interest from the defendants and also for declaration that there is valid and subsisting charge in favour of the plaintiff on the hypothecated goods, plant and machinery of the defendant No. 1 and for a declaration that the plaintiffs are entitled to seize and sell the plant and machinery of the defendant No. 1 for appropriation of the decretal amount. The proforma respondents 2 to 5 were arrayed as principal defendants, while the present appellants were arrayed as defendants 5 to 9. 3. The case of the plaintiff is that in the month of August 1985 the defendant No. 1 company through its directors, approached the plaintiff Bank for grant of loan by way of cash credit facility to the limit of Rs. 2.00 lakhs against which, the book debts of the company were hypothecated and for a further cash credit facility to the limit of Rs. 2.10 lakhs against which, stocks of the company were hypothecated. Defendant Nos. 2 to 4 stood as guarantors accepting joint and several liability for the repayment of the loan together with interest and other charges. On the loan being sanctioned, the defendants availed the cash credit facility of a sum of Rs. 2.00 lakhs and 2.10 lakhs. The defendants 2 and 3 being the directors of the defendant No. 1 had executed demand promissory note dated 1.9.1986 for a sum of Rs. 2.00 lakhs promising to repay the borrowed amount or balance thereof with interest at the rate of 5.5% over Bank rate with a minimum of 15.5% per annum with quarterly rests for value received, along with a letter of continuing security dated 1.9.1986. They had also executed another demand promissory note on the same day for a sum of Rs. 2.00 lakhs promising to repay the borrowed amount or balance thereof with interest at the rate of 5.5% over Bank rate with a minimum of 15.5% per annum with quarterly rests for value received, along with a letter of continuing security dated 1.9.1986. They had also executed another demand promissory note on the same day for a sum of Rs. 2.10 lakhs with identical undertaking for repayment of the loan and they had also executed an agreement of charge and hypothecation of book debts of the defendant No. 1 and had also executed an agreement or hypothecation of tangible machinery and plant on the same clay. Under the terms of agreement, the plaintiff Bank was vested with specific powers to seize and sell the hypothecated goods for recovery of its dues. In addition to the above documents, defendants 2 to 4 had executed two letters of continuing guarantee dated 1.9.1986 for the loan amount undertaking to repay the dues of the defendants No. 1 to the plaintiff Bank along with interest accrued thereon besides cost and expenses. The defendants 1 to 4 enjoyed the cash credit facility by withdrawing money from the plaintiff Bank. All such transactions were posted in the books of account maintained by the Bank in its regular course of business. In addition to the aforesaid documents, the defendant No. 1 company through its directors, executed letters of acknowledgment and confirmation of balance dated 23.8.1988 in favour of the plaintiff Bank. As against the defendants 5 to 8, the case of the plaintiff is that these defendants had joined as directors of the defendant No. 1 with effect from 2.1.1988 and hence, they are also liable jointly and severally for payment of the dues of the Bank. Further case of the plaintiff is that when the defendants had failed to maintain proper discipline in the transactions pertaining to the cash credit account, the plaintiff Bank served a notice on 1.2.1990 on the defendants recalling the cash credit facility and demanding repayment of the entire dues outstanding in each of the two accounts, but the defendants had failed and neglected to pay the dues. In respect of defendant No. 9 namely, Adarsh Paper Board Co. In respect of defendant No. 9 namely, Adarsh Paper Board Co. Pvt. Ltd, plaintiffs case is that since in their written statement, defendants 5 to 8 had claimed that all the properties of defendant No. 1 namely M/s Jamshedpur Card Board Company Pvt. Ltd was purchased by Adarsh Paper Board Co. Pvt. Ltd. through one of the directors namely Sashi Kant Jha vide registered sale deed dated 27.10.1989, therefore, Adarsh Paper Board Co. Pvt. Ltd. is also jointly and severally liable for the payment of the dues to the plaintiff Bank and as such, the said company has been impleaded as defendant No. 9. Plaintiff has claimed that cause of action accrued to it for filing the suit on and from 1.9.1986 when the loan was advanced and on 23.8.1988 when the defendants acknowledged the liability and on 27.1.1990 when the demand notice was issued against the defendants, though notices were issued to the defendants, but the defendants 1 to 4 did not appear to contest the suit. Though notices were issued to the defendants 1 to 4 did not appear at, nor offered any contest. Defendants 5 to 9 had offered contest to the suit by filing written statement and by adducing evidence on their behalf. 4. The contesting defendants who are the appellants herein, have denied and disputed their liability to pay the money as demanded by the plaintiff Bank, besides pleading that the suit is not maintainable against them and the plaintiff has no cause of action against the contesting defendants and also that the suit is barred by limitation and under the provisions of the Bihar Money Lenders Act and Indian Contract Act as well as on the principle of waiver and estoppel. The contesting defendants had also pleaded specifically that the suit is bad for non-joinder of necessary party since Bihar State Financial Corporation, Jamshedpur Branch, is a necessary party, whereas the defendants 5 to 8 have been wrongly made parties to the suit. The contesting defendants had also pleaded specifically that the suit is bad for non-joinder of necessary party since Bihar State Financial Corporation, Jamshedpur Branch, is a necessary party, whereas the defendants 5 to 8 have been wrongly made parties to the suit. In addition to the above mentioned pleadings, the contesting defendants have specifically stated that they were never admitted as directors of the defendant No. 1 company namely the Jamshedpur Paper Board Company and they had never shouldered any responsibility in any capacity on behalf of the said company, nor had they ever approached the plaintiff Bank for any loan whatsoever, nor had executed any document whatsoever to suggest that they had accepted or received any amount as loan from the plaintiff Bank or to have offered to stand as guarantors or even to have acknowledged any debt payable to the plaintiff Bank. It is further stated that the contesting defendants had never joined as directors of defendant No. 1 Company either on 2.11.1988 or on any subsequent date. The specific case of the contesting defendants is that they constitute a body of directors of Adarsh Paper Board Pvt. Ltd (defendant No. 9) which was a company registered under the Companies Act in the year 1989. To their knowledge, the defendant No. 1 through its directors defendant Nos. 2 to 4, was sanctioned a term loan of Rs. 30.00 lakhs by the Bihar State Financial Corporation on 28.1.1982 to enable the company to set up an industrial Unit. The defendant No. 1 had executed and registered the loan agreement in favour of the said corporation on 17.12.1982 by mortgaging the land with the buildings standing thereon besides the entire plant and machinery. The defendant No. 1 thereafter availed the entire amount of loan sanctioned to it by the corporation. Later on, due to default in payment of the corporations dues and after reviewing of the affairs of the defendant No. 1, the Advisory Board of the Corporation, by a notice called upon the defendant No. 1 to clear its dues by 31.1.1989. When despite receipt of demand notice the defendant No. 1 had failed to pay of its dues, the corporation proposed to sell the mortgaged property of defendant No. 1 by inviting tenders. When despite receipt of demand notice the defendant No. 1 had failed to pay of its dues, the corporation proposed to sell the mortgaged property of defendant No. 1 by inviting tenders. In response to the invitation, the defendant No. 9 through one of its directors Shashi Kant Jha, submitted its tender and on approval of the tender, defendant No. 9 purchased all the properties of the defendant No. 1 by virtue of registered sale deed dated 27.10.1989. The properties of defendant No. 1 were specifically detailed and enumerated in Schedule A, B and C in the sale deed which was signed and presented and executed by the Manager of the concerned Branch of the Bihar State Financial Corporation. The claim of the contesting defendants is that to their knowledge, on the date of the aforesaid purchase, the mortgaged Unit of defendant No. 1 was free from all encumbrances charges or dues except that of the Bihar State Financial Corporation and the contesting defendants had purchased the Unit in good faith and without prejudice. The proposal of putting the Unit of defendant No. 1 for auction sale by the Bihar State Financial Corporation and invitation of tender issued by the Corporation was very well within the knowledge of the plaintiff Bank and yet, the Bank had never put forth its claim against the defendants Nos. 1 to 4, nor had the plaintiff Bank ever served any notice on any of the contesting defendants even to inform them about any claim which the Bank may have had against the defendant No. 1. 5. On the basis of the rival pleadings, the learned court below framed the following issues: 1. Is the suit as framed maintainable? 2. Has the plaintiff cause of action for the suit? 3. Is the suit barred by limitation? 4. Is the suit barred by Bihar Money Lenders Act? 5. Is the suit barred by Indian Contract Act? 6. Is the suit barred by principles of waiver and estoppel? 7. Is the suit barred by non-joinder of necessary parties? 8. Are the defendant Nos. 5 to 8 directors of defendant No. 1 and did they took the loan from the plaintiff Bank by way of cash credit? 9. Whether the documents alleged to have been executed by defendant Nos. 2, 3 and 4 are binding upon the defendant Nos. 5 to 8? 10. 8. Are the defendant Nos. 5 to 8 directors of defendant No. 1 and did they took the loan from the plaintiff Bank by way of cash credit? 9. Whether the documents alleged to have been executed by defendant Nos. 2, 3 and 4 are binding upon the defendant Nos. 5 to 8? 10. Are the defendant No. 9 and its directors liable to pay any amount to the plaintiff cither jointly or severally? 11. Whether the properties of defendant No. 9 are liable to be attached and sale for satisfaction of the claim of the plaintiff? 12. Whether the plaintiff served any notice on the defendant Nos. 5 to 8? 13. To what relief or reliefs if any the plaintiff is entitled to? 6. On issue No. 1 relating to maintainability of the suit and on issue No. 7 regarding non-joinder of the necessary party, the learned court below had observed that the contesting defendants have not produced any paper to show that the Bihar State Financial Corporation had invited any tender for the sale of the movable goods of the defendant No. 1, nor they have produced any document to show that the properties of the defendant No. 1 claimed to have been purchased by the defendant No. 9, were in fact put on auction after observing all the requisite legal formalities. The Trial Court had also observed that the defendants have not brought any evidence on record to suggest that the plaintiff Bank had the knowledge that the properties of the defendant No. 1 which were hypothecated in favour of the plaintiff Bank, were sold by the Bihar State Financial Corporation to the defendant No. 9 through the purported sale deed. On these observations, the Trial Court recorded its finding that Bihar State Financial Corporation was not a necessary party and, therefore, failure of the plaintiff to implead the B.S.F.C. as a party defendant, is of no consequence. On issue No. 4 regarding limitation, the trial court had observed that from the evidence particularly Ext.-5 and 5A which has been executed on 23.8.1998 and have been brought on record by the plaintiff, it transpires that the defendants 2 to 4 being the directors of defendant No. 1, have acknowledged the debt payable to the plaintiff, whereas the suit was filed within three years thereafter on 5.5.1990 and, therefore, suit was not barred by limitation. On issue Nos. On issue Nos. 8 and 9, the trial court had observed that since according to the plaintiffs own case, the only documents relied upon by the plaintiff was executed by the defendants 2 and 3 and none of any such documents were executed by the defendants 5 to 9, therefore, none of the documents which were executed by the defendants 1 to 4 are binding upon the defendants 5 to 8, although such documents are binding upon the defendants 1 to 4. 7. Issue Nos. 10 and 11 as to whether defendant No. 9 and its directors are liable to pay the amount to the plaintiff Dank either jointly or severally or any property of defendant No. 9 is liable to be attached and sold for the satisfaction of the claim of the plaintiff, learned court below had observed that even as per admitted case of the contesting defendants, defendant No. 9 had purchased the hypothecated goods of the defendant No. 1 over which a charge was created in favour of the plaintiff Bank way back on 1.9.1986. The purchaser being defendant No. 9 who is represented by the contesting defendants 5 to 8, it was within the knowledge of the contesting defendants at the time of the alleged auction purchase that the defendant No. 1 company had obtained loan from the plaintiff Bank on the basis of the plant and machinery and goods of the defendant No. 1 which was hypothecated in favour of the plaintiff Bank. The contesting defendants having failed to make any inquiry to ascertain the extent of debt owed by the defendant No. 1 to the plaintiff Bank and the defendants having acquired properties of the defendant No. 1, the liability to clear the dues of the plaintiff Bank continues to rest upon the contesting defendants as well as defendant No. 9. On such observations, the learned court below has recorded its finding that the defendants 5 to 8 and defendant No. 9 are liable jointly and severally to pay the claimed amount to the plaintiff and further, that the properties of Adarsh Paper Board Co. Pvt. Ltd (defendant No. 9) together with its entire plant, machinery and goods, are liable to be attached and sold for the satisfaction of the claim of the plaintiff Bank. Pvt. Ltd (defendant No. 9) together with its entire plant, machinery and goods, are liable to be attached and sold for the satisfaction of the claim of the plaintiff Bank. On the basis of the above finding on various issues, the learned court below had decreed the suit in favour of the plaintiff Bank and against the contesting defendants. 8. Appellants have challenged the impugned judgment and decree of the learned court below primarily on the ground that the learned court below has totally misconstrued and misconceived both the pleadings of the contesting defendants / appellants and also the principle of law involved and the finding on the various relevant issues as recorded by the court below, is totally misconceived and misplaced. 9. Shri P.K. Prasad, learned Counsel representing the appellants, submits that the learned court below has gravely erred in failing to appreciate that even according to the admission of the plaintiff, the present appellants (defendants 5 to 8) were not at all concerned in any manner with any of the transactions entered into by the defendant No. 1 through defendants 2 to 4 and in fact, admittedly these appellants (defendants 5 to 8) had never even joined the defendant No. 1 as its directors, nor were they concerned in any manner in any of the transactions relating to auction purchase of the Unit of the defendant No. 1 and as such, these appellants were neither necessary, nor proper party to the suit and as such the suit should have been dismissed for misjoinder of the parties. Learned Counsel argues further that admittedly, the Unit of the defendant No. 1 was earlier mortgaged with the Bihar State Financial Corporation and the Unit was auctioned sold by the Corporation in terms of Section 29 of the State Financial Corporation Act and therefore, it was incumbent upon the plaintiff to implead the Bihar State Financial Corporation as a necessary party and in absence of impleading the corporation as party defendant, the suit ought to have been dismissed for non-joinder of necessary party. This according to the learned Counsel, was more relevant due to the fact that the entire proposal of tender, sale, etc. of defendant No. 1 company by the Bihar State Financial Corporation was within the knowledge of the plaintiff even before the Unit of defendant No. 1 was sold in auction. This according to the learned Counsel, was more relevant due to the fact that the entire proposal of tender, sale, etc. of defendant No. 1 company by the Bihar State Financial Corporation was within the knowledge of the plaintiff even before the Unit of defendant No. 1 was sold in auction. Learned Counsel invites attention to the evidence of plaintiff witness No. 5 who had categorically admitted that the plaintiff Bank had the knowledge that the defendant No. 1 had taken loan from the Bihar State Financial Corporation. Learned Counsel argues further that the learned court below ought to have considered that the contesting defendants / appellants had adduced sufficient evidence to show that at the time of auction sale of the Unit of defendant No. 1, its stock was totally nil and, therefore, since the plaintiff had charge only upon the stock of defendant No. 1, the claim of the plaintiff in so far as the contesting defendants / appellants was wholly baseless, unfounded and not maintainable. Referring to the finding of the trial court on issue Nos. 10 and 11, learned Counsel submits that the reasoning assigned in support of the findings are totally perverse and against the materials on record and against the provisions of law. According to the learned Counsel, learned court below ought to have considered that as per settled law, the purchaser under Section 29 of the State Financial Corporation Act is not liable in respect of the clues / liability of the Unit prior to its purchase. 10. As against this, learned Counsel representing the Respondent Bank argues that even though, appellants had not approached the plaintiff Bank for any loan, nor did they execute any document acknowledging any debt due by the defendant No. 1 to the Bank, yet the appellants cannot escape from their liability to pay its dues in the Bank. Learned Counsel would argue that the agreement of hypothecation executed by the defendant No. 1 through defendants 2 to 4 were in respect of the book debts and the entire stock of defendant No. 1. Even prior to the date of purchasing the Unit of defendant No. 1 in auction, the appellants were aware of the fact that the defendant No. 1 had obtained loan from the Bank and had hypothecated its goods including entire stocks, by way of security for the repayment of the debts to the Bank. Even prior to the date of purchasing the Unit of defendant No. 1 in auction, the appellants were aware of the fact that the defendant No. 1 had obtained loan from the Bank and had hypothecated its goods including entire stocks, by way of security for the repayment of the debts to the Bank. Despite knowledge of such fact, appellants had purchased the Unit in auction together with the entire stocks, details of which have been enumerated in the Deed of conveyance purportedly executed by the Bihar State Financial Corporation in favour of the defendant No. 9. As such, since the defendant No. 9 represented by the appellants, had taken over the goods and stock of the defendant No. 1, the Bank, on the basis of the agreement of hypothecation, is certainly entitled to seize all such goods of defendant No. 1 which was passed over to the defendant No. 9 and to sell the same for realizing all its dues and the appellants being the directors of the purchaser namely defendant No. 9, they are liable to pay of the debt due to the plaintiff Bank. 11. Rival arguments of the learned Counsel raises following questions to be addressed. 1. Whether Bihar State Financial Corporation was a necessary party to the suit and the suit was bad for non-joinder of the corporation as necessary party? 2. Whether the auction purchaser under Section 29 of the State Financial Corporation Act could be held liable for the past debts for the Unit purchased by him? 12. Admittedly, the Unit of the defendant No. 1 was put on auction sale by the Bihar State Financial Corporation for the purpose of realizing its dues owed by the defendant No. 1. The contesting defendants had specifically pleaded that the plaintiff Bank was aware of the fact that the Bihar State Financial Corporation had notified the sale of the Unit of the defendant No. 1 and had invited tenders for the auction sale. This fact has been acknowledged even by the witness examined by the plaintiff Bank (PW5), who has admitted that the plaintiff Bank did have the knowledge that the defendant No. 1 had availed substantial amount of loan from the Bihar Slate Financial Corporation. This fact has been acknowledged even by the witness examined by the plaintiff Bank (PW5), who has admitted that the plaintiff Bank did have the knowledge that the defendant No. 1 had availed substantial amount of loan from the Bihar Slate Financial Corporation. It is in the case of the plaintiff that the procedure laid down under Section 29 of the State Financial Corporation Act for conducting auction sale of any industrial Unit was not complied with. In view of the claim of the plaintiff Bank, that the Unit of defendant No. 1 together with its plant, machinery, goods and stock were auction sold by the Bihar State Financial Corporation, and the plaintiff having such knowledge of the fact even prior to the date of auction sale, it was incumbent upon the plaintiff Bank to stake its claim and to implead the Bihar State Financial Corporation as a necessary party who alone could have answered as to whether the Unit of defendant No. 1 was auction sold together with the goods of the Unit which were hypothecated in favour of the plaintiff Bank and that it had the knowledge that a charge in favour of the plaintiff Bank was created over the goods of the Unit of the defendant No. 1. Since the plaintiff have sought to claim relief(s) against the present appellants also, it was incumbent upon the plaintiff to implead the Bihar State Financial Corporation as a necessary party and in absence of impleading the Bihar State Financial Corporation as a party defendant, the suit becomes bad for non-joinder of necessary party. The finding of the learned court below that since the contesting defendants has not adduced adequate evidence to confirm that the auction sale was conducted according to the procedure laid down under Section 29 of the State Financial Corporation Act, and also to confirm that the plaintiff Bank did have notice of such proposed auction and therefore, the Bihar State Financial Corporation cannot be considered to be as a necessary party, is apparently misconceived and misplaced. 13. 13. On the issue as to whether the auction purchaser is liable for payment of the past debts under Section 29 of the Act, the plaintiff Bank has sought to impose liability upon the present appellants and on defendant No. 9 on the ground that the hypothecated stock and goods of the defendant No. 1 which were earlier hypothecated in favour of the Bank by the defendant No. 1 and its directors namely defendants 2 to 4, were transferred to the defendant No. 9 and its directors namely, the present appellants and, therefore, the plaintiff is entitled to seize all such hypothecated goods and to sell the same for recovery of its debts against the defendants. The contesting defendants had pleaded that the plaintiff Bank is estopped from laying any claim on the principles of waiver and acquiescence since even though, plaintiff did have the knowledge that the Bihar State Financial Corporation had issued notice for auction sale of the Unit of the defendant No. 1 and had even invited tender for the proposed sale, the plaintiff Bank had never intervened or staked its claim of having charge over the goods and stock of the Unit of the defendant No. 1. This stand taken by the contesting defendants is not without substance since it has been admitted even by the witness examined on behalf of the plaintiff that the plaintiff Bank did have knowledge of the fact that the defendant No. 1 had borrowed substantial amount of money from the Bihar State Financial Corporation and that the entire plant and machinery of the Unit was under hypothecation with the Bihar State Financial Corporation. Even if the stand taken by the plaintiff Bank that it had no knowledge of the auction sale or of the notice inviting tender of the proposed sale, and that the sale was conducted without public disclosure at all is accepted, yet the Banks prayer for relief against the contesting defendants / appellants cannot succeed. This is for the reason, that there was no privity of contract between the Bank and the present appellants / contesting defendants. 14. The specific stand of the contesting defendants is that they had purchased the Unit of the defendant No. 1 in the auction sale by virtue of a registered sale deed dated 27.10.1989 (Ext.-A) executed in favour of the defendant No. 9 by the Bihar State Financial Corporation. 14. The specific stand of the contesting defendants is that they had purchased the Unit of the defendant No. 1 in the auction sale by virtue of a registered sale deed dated 27.10.1989 (Ext.-A) executed in favour of the defendant No. 9 by the Bihar State Financial Corporation. On perusal of the contents of the Ext.-A, it would appear that the Unit of defendant No. 1 namely Jamshedpur Card Board Company Pvt. Ltd had availed a term loan of Rs. 30.00 lakhs from the Bihar State Financial Corporation on 28.1.1982 for setting up an industrial Unit and by way of security, the Unit had mortgaged its entire plant and machinery besides the land on which the Unit was established and the corresponding document of mortgage and loan agreement were executed in favour of the financer on behalf of the defendant No. 1 by its directors namely defendants 2 to 4 on 17.12.1984. Consequent upon default in repayment of the loan, and in the exercise of its right reserved in the agreement, the financer had recalled the loan as per the provisions of Sections 29 and 30 of the State Financial Corporation Act, 1951. The corporation thereafter advertised the mortgaged assets of the Unit of the defendant No. 1 for sale inviting tenders by 18.3.1989. In response, the defendant No. 9 represented by its director Shashi Kant Jha, had submitted its tender and on acceptance of the condition and the terms of offer for sale, the sale deed was executed and registered on 27.10.1982 in favour of the said purchaser. Pursuant to the execution of the sale deed, the lease hold rights over the plots were released in favour of the purchaser and subsequently transferred in the name of the purchaser by the lesser namely, A.I.D.A. and the entire plant and machinery as detailed in Schedule B and Schedule C of the sale deed were transferred to the purchaser. The items mentioned in the schedule B include plant, while items mentioned in Schedule C are the items of machinery. A categorical affirmation on the part of the vendor, as recorded in the sale deed, is that the sale of the mortgaged properties is free from all charges, liability and encumbrance. The items mentioned in the schedule B include plant, while items mentioned in Schedule C are the items of machinery. A categorical affirmation on the part of the vendor, as recorded in the sale deed, is that the sale of the mortgaged properties is free from all charges, liability and encumbrance. It is apparent therefore that to the knowledge of the purchaser, except the earlier charge over the mortgaged properties created in favour of the vendor / corporation, there was no other encumbrance over the said properties of the Unit of the defendant No. 1. From the list of items, transferred to the purchaser by way of auction sale, it appears that it was the plant and machinery of the Unit of the defendant No. 1 which were the items of sale and transfer. The sale deed does not contain any reference whatsoever to the hook debts or any existing stock of defendant No. 1 as being the subject of sale or transfer. The specific claim of the plaintiff Bank is that as security for the loan advanced to the defendant No. 1, agreement of hypothecation (Ext.-5) was executed by and on behalf of the defendant No. 1 by the defendants 2 to 4 in respect of the book debts of the defendant No. 1 and likewise, by another agreement of hypothecation (Ext.-5A), stocks including paper, paddy straw, coal, wood, lime, chemical, diesel, finished straw boards, etc. were hypothecated in favour of the Bank. All these documents were executed on 1.9.1986. The items of hypothecation do not include the fixed plant and machinery and other immovable properties. In fact, even in the plaint, the plaintiff Bank has claimed that the hypothecation was only in respect of book debts and stocks of the Unit of defendant No. 1 and the loan amount by way of cash credit facility was extended for the purposes of enabling working capital. Learned Counsel for the respondents invites attention to Ext.-7 addressed to the manager of the plaintiff Bank by one of the directors of defendant No. 1 which purports to convey that the loan advanced by the Bank to the defendant No. 1 was against the security of hypothecation of the plant and machinery and that such plant and machinery constitute movable property. The aforesaid letter does not bear any date. The aforesaid letter does not bear any date. Even otherwise, from the date mentioned in the stamp paper, it appears that the stamp paper was purchased on 2.4.1986. Admittedly, the letter could have been written only thereafter. Such an acknowledgment even if made by and on behalf of the defendant No. 1 by any of its directors will not in itself create any advantage to the plaintiff Bank, firstly because, in the agreement of hypothecation (Ext.-5 and 5A), there is no reference to any plant and machinery or any such articles denoted and described as movable items. Secondly because, the first charge in respect of the entire plant and machinery of the Unit of the defendant No. 1 was created in favour of the Bihar State Financial Corporation by and on behalf of the defendant No. 1 on 21.8.1982. 15. The sale deed (Ext.-A) by virtue of which defendant No. 9 had acquired the Unit of the defendant No. 1, does not contain any averment that the plant and machinery as mentioned in the Schedule-B and C of the sale deed was encumbered in any manner with any creditor other than the Bihar State Financial Corporation, nor does it contain any stipulation that the purchaser shall be liable for any past debts owed by the defendant No. 1 to any other creditor. Even if, the plaintiff would lay its claim on defendant No. 9 and its directors namely, the present appellants on the premise that they are the transferee of the Unit of the defendant No. 1, such claim could have been maintainable at best in respect of the book debts, and goods which were hypothecated in favour of the Bank. From the sale deed (Ext.-A) as mentioned above, there is no indication that any book debts or stock or movable goods were sold or transferred to the purchaser namely defendant No. 9. No evidence has been led on behalf of the plaintiff Bank that there existed any book debts or stock or such goods in the form of movable tangible property lying or remaining with the Unit of the defendant No. 1 on or about the date when the Unit was sold in auction to the purchaser (defendant No. 9). No evidence has been led on behalf of the plaintiff Bank that there existed any book debts or stock or such goods in the form of movable tangible property lying or remaining with the Unit of the defendant No. 1 on or about the date when the Unit was sold in auction to the purchaser (defendant No. 9). Strangely enough, a search report (Ext.-12), adduced in evidence by the plaintiff Bank indicates that at the instance of the plaintiff Bank, one of the partners of the chartered accountant of the Bank had made a search of the industrial Unit of the defendant No. 1 on 13.3.1997. The report submitted by the chartered accountant indicates the names of defendants 1, 2, 3 and 4 as the directors of the Unit. The Annexure enclosed with the report clearly declares that the Unit namely Jamshedpur Card Board Company Pvt. Ltd. had obtained a loan of Rs. 30.00 lakhs by creating charge over its land, building, plant and machinery in favour of the Bihar State Financial Corporation and against the sum of Rs. 4.10 lakhs, the Unit had created charge over its stock in favour of the Bank of India (plaintiff). Even this report does not indicate that on the date of search of the Unit, there was any stock or such goods existing in the Unit which could correspond to the items hypothecated in favour of the plaintiff Bank. 16. In the light of the above discussion, the plaintiffs claim that the documents executed by the defendants 2, 3 and 4 in favour of the plaintiff Bank in respect of the loan advanced by the Bank to defendant No. 1, could not in any manner, be binding upon the contesting defendants 5 to 8 namely the appellants herein and neither can the claim of the plaintiff Bank that the properties of the defendant No. 9 are liable to be attached and sold for the satisfaction of the claim of the plaintiff Bank, be accepted. The plaintiff Bank has therefore no cause of action whatsoever against the contesting defendants 5 to 8 or against the defendant No. 9, nor is it entitled to any relief whatsoever against these defendants. The plaintiff Bank has therefore no cause of action whatsoever against the contesting defendants 5 to 8 or against the defendant No. 9, nor is it entitled to any relief whatsoever against these defendants. The findings recorded by the trial court in favour of the plaintiff Bank on these issues against the contesting defendants are totally misconceived and perverse as the same is against the weight of evidence on record. The plaintiff Bank may at best have a cause of action against the defendant No. 1, 2, 3 and 4 and certainly not against the defendants 5 to 9. 17. In the light of the above discussion, the impugned judgment and decree as passed by the learned court below against the contesting defendants 5 to 9 namely the appellants herein, is hereby set aside. This appeal by the appellants, who are the contesting defendants, is therefore allowed.