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2011 DIGILAW 299 (BOM)

Avis marine engineers (P) Ltd. v. A. R. C. I. Ltd

2011-03-08

ALLAH RAHAM

body2011
JUDGMENT : ALLAH RAHAM, J. (Chairperson) 1. This Appeal impugns order dated 17th July, 2006 passed by the learned Presiding Officer, Debts Recovery Tribunal No. 11, Mumbai, whereby Original Application No. 226 of 2003 filed by State Bank of India, the Assignor of the sole respondent herein was allowed with costs against the defendant Nos. 1 and 4. A declaration of mortgage was also given. From the record it appears that defendant No. 1 is the borrower Company of which defendant Nos. 2 and 3 are Directors who are sued as Guarantors. The defendant No. 4 is a firm who is sued as Guarantor-cum-Mortgagor. 2. The case of the applicant (respondent herein) is that on or about 8th June, 1999 it had sanctioned to the defendant No. 1 Bank Guarantee of Rs. 50 lacs against guarantee by the defendant Nos. 2 to 4. The security was also of mortgage by deposit of title deeds by defendant No. 4 of its property. On or about 23rd March, 2001, the applicant also sanctioned 3 facilities. The defendant No. 1 executed Demand Promissory Note and usual security documents while the defendant No. 4 continued equitable mortgage. The defendant No. 1 availed of the facilities from time-to-time. However, the said defendant did not make repayments despite repeated demands. Hence, this O.A. was filed. 3. The defendants filed Written Statement and contended that the defendant No. 1 had given settlement proposal of Rs. 30 lacs and from out of that amount Rs. 7.50 lacs were deposited. It was also contended that the defendant Nos. 2 to 4 are not necessary parties on account of the agreement between the applicant and defendant No. 1 of Settlement. Further plea of defendants is that there is novation of the contract. It is also pleaded by the defendants that the O.A. is time-barred and the same is liable to be dismissed. 4. After hearing the learned Counsel for the parties and perusing the record the learned P.O. held that the defendant No. 4 will be liable as Mortgagor since there is extension letter (Ext. 27) read with the letter regarding confirmation of deposit of Title Deeds (Ext. 26) of mortgage earlier created. He, therefore, allowed the O.A. against the defendant Nos. 1 and 4 and limited the liability of defendant No. 4 to the extent of the mortgaged property. 27) read with the letter regarding confirmation of deposit of Title Deeds (Ext. 26) of mortgage earlier created. He, therefore, allowed the O.A. against the defendant Nos. 1 and 4 and limited the liability of defendant No. 4 to the extent of the mortgaged property. It was also declared that the outstandings are secured by equitable mortgage of defendant No. 4's property being Flat No. 715 on the 7th Floor, Raheja Chambers, Plot No. 213 in Block III of Backbay Reclamation Scheme, Mumbai. 5. Aggrieved against the aforesaid order the appellants (defendant Nos. 1 and 4) have filed this Appeal. 6. I have heard the learned Counsel for the parties and have carefully perused the record. 7. Learned Counsel for the appellant has raised the contention that there is no privity of contract between the Bank and the defendant No. 4. He has referred to the pleading contained in para 2 of the Written Statement where it is pleaded that "....There is no privity of contract existing between the defendants and the applicants. Admittedly, parties have agreed and acted upon an agreement by which the alleged liability of the defendants is extinguished and no more exists...." Mr. Nagori, learned Counsel for the respondent has, however, referred to the letter dated 10th August, 2001 of defendant No. 4, This letter in the opening para says that "I am writing this to confirm that I have deposited with the Bank on 26th March, 2001, documents of title relating to my property at 715, Raheja Chambers, Nariman Point, Mumbai-400021 described (hereinafter referred to as the 'said property') with the intention of creating an equitable mortgage on the said property by way of collateral security for the amounts due to Bank from me under the following credit facility extended to me by the Bank." 8. On 23rd March, 2001, the Bank had granted Bank Guarantee Facility of Rs. 50 lacs and additional Over-draft Facility of Rs. 55 lacs. It is these facilities in respect of which the defendant No. 4 had created equitable mortgage by deposit of Title Deeds. Therefore the contention of the appellant that there is no privity of contract between the Bank and the defendant No. 4 is without any basis and has got to be rejected. 9. The next contention raised by the learned Counsel for the appellant is that there has been a novation of contract. Therefore the contention of the appellant that there is no privity of contract between the Bank and the defendant No. 4 is without any basis and has got to be rejected. 9. The next contention raised by the learned Counsel for the appellant is that there has been a novation of contract. Hence, the O.A. as framed is not maintainable. His further submission is that a sum of Rs. 7.50 lacs was deposited by the appellant and the same has been appropriated by the respondent. A perusal of the record shows that on 18th June, 2003 the defendant No. 1 wrote a letter to the Assignor of the respondent Bank along with One Time Settlement proposal. The defendant No. 1 requested the Bank "...to accept Rs. 30 lacs as a One Time Settlement of dues of our Company payable within 4 months. ..." On 20th June, 2003 the Bank replied to the offer of the defendant advising him to improve the compromise amount to enable the Bank to proceed further in the matter and also to deposit 25% of compromise offer to no Lien Account. On 5th July, 2003 the defendant No. 1 wrote to the Bank. Relevant extract of the letter is quoted as under: As agreed in our letter No. 296 dated 18th June, 2003. We are enclosing a Pay Order favouring SBI A/c Avis Marine Engineers Pvt. Ltd. No Lien A/c drawn on HDFC Bank. We are not in a position to improve our offer at this stage and request you to kindly accept the offer as made. 10. The defendant No. 1 also enclosed a Bank Manager's Cheque of Rs. 7.50 lacs. The amount of Rs. 7.50 has been appropriated by the respondent. In the background of these facts the contention of the learned Counsel for the appellant is that there is novation of the contract between the borrowers. An amount of Rs. 7.50 lacs was deposited by the concerned defendants and this was done on the advice of the Bank. 25% of Rs. 30 lacs is Rs. 7.50 lacs. Therefore, this amounts to novation of contract. However, the argument of Mr. Nagori, learned Counsel for the respondent, is that there is no novation of contract. In fact, the appellants gave an offer to the Bank to settle the matter for Rs. 30 lacs. 25% of Rs. 30 lacs is Rs. 7.50 lacs. Therefore, this amounts to novation of contract. However, the argument of Mr. Nagori, learned Counsel for the respondent, is that there is no novation of contract. In fact, the appellants gave an offer to the Bank to settle the matter for Rs. 30 lacs. The Bank gave counter offer asking the appellants to improve the compromise amount and also arrange to deposit 25% of the compromise offer. The defendants accepted the part of the counter offer but did not improve the compromise amount, therefore, no concluded contract has come into being. The defendant did not improve the compromise amount though it deposited 25% of the original offered amount. In such circumstances no concluded contract has come into being. The contention of the appellants that there has been a novation is without force and has got to be rejected. The respondent was having a claim against the defendants and it rightly appropriated a sum of Rs. 7.50 lacs deposited by the appellants. 11. The third and the last contention raised by the appellant's learned Counsel is that the claim is based on Bank Guarantee which is barred by time. In para 3 of the Written Statement it has been pleaded by the defendants that the question of payment of the alleged amounts does not at all arise as the alleged claim of the applicant is clearly time-barred. Even the demand notice has been raised after the expiry of the limitation period and therefore the same merited no compliance. The alleged Bank Guarantee is dated 14th June, 1999 and the claim based thereon is filed in July, 2003 which is clearly barred by law of limitation. 12. The learned Counsel for the respondent has, however, drawn our attention to the revival letter (acknowledgement signed by the appellant on 28th November, 2002). The debt is acknowledged on 28th November, 2002 while the O.A. is filed on 14th July, 2003. Therefore, there is no question of the O.A. being barred by time. 13. Learned Counsel for the appellant has also submitted that the property of defendant No. 4 is sought to be sold though the same was not mortgaged against the guarantee for Over Draft. A perusal of the Sanction Letter dated 23rd March, 2001 shows that additional Over Draft Facility of Rs. 13. Learned Counsel for the appellant has also submitted that the property of defendant No. 4 is sought to be sold though the same was not mortgaged against the guarantee for Over Draft. A perusal of the Sanction Letter dated 23rd March, 2001 shows that additional Over Draft Facility of Rs. 55 lacs was secured against the extension of equitable mortgage over the office premises situated at 715, Raheja Chamber, Nariman Point, Mumbai. The letter of extension of equitable mortgage further clarifies the position that the equitable mortgage was created by the defendant No. 4 in respect of the Bank Guarantee and the Term Loan (additional Over Draft) of Rs. 106.85 lacs. Hence, the submission of the learned Counsel for the appellant is bereft of merit and deserves to be rejected. 14. No other point has been pressed before me. The learned P.O. rightly allowed the O.A. against the defendant Nos. 1 and 4. The Appeal has no merit and deserves to be dismissed with the following order. ORDER The Appeal is hereby dismissed with costs.