JUDGMENT : Sureshwar Thakur, J. The Himachal Pradesh State Industrial Development Corporation Limited, a Company incorporated under the Companies Act 1956, has filed the present suit through its Senior Manager (Project) against defendants No. 1 to 6 for recovery of a sum of Rs.80,25,529/-. 2. Cause of action, as disclosed in the plaint, may be summed up thus. One of the functions of the plaintiff – Corporation is to provide financial assistance to industrial units. Defendant No. 1, which is a private limited company, applied to the plaintiff for grant of term loan of Rs.53.89 lacs for construction of a building, purchase of land, plant and machinery for setting up a factory of manufacturing of HDPE/PP Woven Sacks at Village Kisanpura, Tehsil Nalagarh, District Solan, H.P.. The financial assistance of Rs.53.89 lacs to defendant No.1 company was sanctioned on 10.02.1986 and 4.1.19888 against which term loan of Rs.41.99 lacs was disbursed. The interest agreed to be paid by defendant No.1 on loan amount was 15.5.% per annum with half yearly rests with a rebate of 3% for timely payments. For securing the repayment of the said loan and interest thereon, defendant No.1 through its directors, defendant No.3 and 4 executed loan agreement on 19.5.1987 and 15.9.19888 with respect to term loan of Rs.32.50 lacs and Rs.21.39 lacs and Hypothecation agreement regarding land, building, plant and Machinery and other assets was also executed on 19.5.1987 and 15.9.1988. Apart from this equitable mortgage by deposit of title deeds of the properties of the industrial unit concern of defendant No.1 in favour plaintiff corporation was also made on 19.5.1987 and 15.9.1988 with proforma defendant No.5. Defendant No.1 also executed revised repayment agreement on 3.8.1994. Defendants No. 2 to 4 stood guarantors with respect to the loans advanced to defendant No.1 company and consequently executed deed of Guarantee on 19.5.1987, 23.5.1987 and 15.9.1988 and they being guarantors are liable to pay the outstanding loan amounts alongwith interest to the plaintiff. The liability of defendant No.2 to 4 is joint and several with defendant No.1 and it is a continuing guarantee provided by defendant No.2 to 4 in favour of plaintiff company in respect of loans advanced by the plaintiff to defendant No.1 company. The liability of defendant No.2 to 4 is joint and several with defendant No.1 and it is a continuing guarantee provided by defendant No.2 to 4 in favour of plaintiff company in respect of loans advanced by the plaintiff to defendant No.1 company. It has been averred that as per loan documents executed by the defendants in favour of the plaintiff corporation, the loan together with agreed interest was to be paid in half yearly installments commencing from 10.9.1988 and the last installment payable on or before 10.03.1997. The defendants failed to comply with the terms and conditions of loan documents and also failed to pay the installments of principal amount and interest thereon in accordance with the repayment schedule entered int the loan documents. The money advanced by the plaintiff to the defendants was secured by Hypothecation, mortgage/charge on the immovable property and other assets of the defendants. It has been averred that the defendants approached for rehabilitation of its Unit and rehabilitation package was sanctioned. The repayment of principal amount outstanding i.e. 4.199 lacs was rescheduled. The interest in default was also funded. Defendant No.1 executed revised agreement for repayment schedule on 3.8.1994. As per agreement, the funded interest of Rs.17.02 lacs was to be repaid in half yearly installments commencing from 10.9.1994 and last is repayable on 10.9.2000. The principle amount of Rs.41.99 lacs together with interest @13.5% with half yearly rests and additional interest @ 4% in case of default is to be paid in half yearly installments commencing from 10.9.2000 and last installment is payable on 10.03.2004. It has been pleaded that the outstanding amount of the plaintiff against defendants as on 10.09.1998 stood at Rs.80,25,529 as under;- (i) Principal amount - Rs.41,49,000.00 (ii) Interest - Rs.38,61,733.00 (iii) Misc. Expenses - Rs. 14,796.00 Total - Rs.80,25,529.00 It has been further pleaded that a notice was issued to the defendants on 28.9.1998 asking them to pay amount of Rs.80,25,529/-. However, the defendants did not clear their liability despite service of notice. Hence the plaintiff corporation instituted the instant suit against the defendants for recovery of a sum of Rs.80,25,529.00 with costs and interest at the rate of 13.5% per annum with half yearly rests from the date of the institution of the suit till the realization of the decretal amount. 3. Hence the plaintiff corporation instituted the instant suit against the defendants for recovery of a sum of Rs.80,25,529.00 with costs and interest at the rate of 13.5% per annum with half yearly rests from the date of the institution of the suit till the realization of the decretal amount. 3. It is pertinent to mention here that defendants No.1, 3 to 5, have omitted to record their presence before this Court, hence, they are proceeded against ex-parte. However, defendants No. 3 and 4 have filed joint written statement to the plaint, wherein, they have taken preliminary objections qua maintainability, plaintiff has not approached this Court, limitation, suit being deserved to be rejected under Order 7, Rule 11 of the CPC and that defendants No.3 and 4 are being arrayed as guarantors to the purported loan which has been sanctioned to defendant No.2, who was also a guarantor and on his death the guarantee has been discharged by the plaintiff, the other defendants, therefore, cannot be held to be liable. On merits, defendants No.3 and 4 denied the authority of the plaintiff to institute the extant suit by the officer concerned. It is submitted that the under the funding programme of the plaintiff, the Industrial Development Bank of India is providing finance/refinance to the plaintiff with clear cut stipulations that the rate of interest would not exceed the rate as fixed by the Industrial Development Bank of India. It is submitted that the plaintiff has suppressed the facts as the loan purportedly sanctioned stand disbursed. Defendant No.1 was controlled by the conditions in the letter issued by the Industrial Development Bank of India wherein the loaning rate was pegged down to 10% on simple interest basis which the plaintiff could not charge. It is admitted that an application was submitted for sanction of term loan. However, the amount is not admitted to be correct since the plaintiff has been placing hurdles in the proper and smooth functioning of defendant No.1. It is admitted that the applications for financial assistance were made. However, the amount was refinanced by the Industrial Development Bank of India and the rate of interest was not 15.5% per annum with half yearly rests. The plaintiff has conveniently withheld the fact in all cases the rate of interest is fixed by the Industrial Development Bank of India over which no interest can be charged by the plaintiff. However, the amount was refinanced by the Industrial Development Bank of India and the rate of interest was not 15.5% per annum with half yearly rests. The plaintiff has conveniently withheld the fact in all cases the rate of interest is fixed by the Industrial Development Bank of India over which no interest can be charged by the plaintiff. It is further submitted that owing to the late disbursement made, the defendants have suffered loses. It has been submitted that there has been no creation of equitable mortgage by deposit of title deeds, as alleged. In so far as the agreements of hypothecation are concerned, the blanks in the documents have been filled in subsequently to the disadvantage of the defendants. The documents alleged to be contained material interpolations and therefore, no liability can be fastened on the defendants. It is submitted that defendant No.2 has died on 7.3.1993 and the plaintiff was aware about this fact at the time of institution of the suit. The plaintiff has categorically made a statement seeking the deletion of the name of defendant No.2 to the grave prejudice of the defendants. It is submitted that the suit is bad for non joinder of necessary parties and, therefore, the suit deserves to be dismissed on this ground alone. It is submitted that the plaintiff is aware about the fact that the replying defendants have instituted another suit before this Court bearing C.S. No.4 of 1999, in which the plaintiff has been arrayed as defendant No.8, hence, the plaintiff is aware of the fact that it is not the replying defendant but other defendants in the suit, as aforesaid i.e. C.S. No.4 of 1999, who have the actual control of the company and are utilising its funds. There is guarantee existing and subsisting between the plaintiff and the replying defendants. It is denied that defendants at any point of time undertook to repay the outstanding loan amount and as such no liability can be fastened on the replying defendants. It is also denied that any mortgage has been created by the replying defendants and that sums secured is Rs.53.81 lacs or that rate of interest is 15.5% per annum as alleged. It is denied that the suit of the plaintiff is within limitation. The responsibility to pay the amount, if any, may be that of other defendants in Civil Suit No.4/99. It is denied that the suit of the plaintiff is within limitation. The responsibility to pay the amount, if any, may be that of other defendants in Civil Suit No.4/99. It is submitted that no notice calling upon the defendants to make the payment of the amount, was ever served upon them. It is submitted that no amount is due and outstanding from the defendants. Hence they prayed for dismissal of the suit. 4. Defendant No.6 contested the suit and filed written statement to the plaint, wherein, it has taken preliminary objection inter alia maintainability, suit being barred under the provisions of Recovery of Debts Due to Banks and Financial Institutions Act, 1993, jurisdiction, mis joinder of various causes of action, esptoppel etc. It is admitted that the plaintiff has sanctioned loan to defendants No.1 to 4. It is submitted that terms and conditions were settled between the plaintiff and other defendants and are in their personal knowledge. It is submitted that the replying defendant bank holds second charge over all the mortgaged and hyothecated properties of defendants No.1 to 4 as M/s Oberoi Plastics Limited, applied for grant of cash credit limit of Rs.37 lacs in the year 1987, cash credit limit whereof was sanctioned in its favour vide resolution of 28.10.1987. By way of security to secure the repayment of this loan defendant No.1 to 4 also created regular mortgage of land measuring 119 Kanal 4 Marla belonging to them in favour of the replying defendant. The said loan was also secured by second charge on land, building and machinery belonging to defendant No.1 company. It is submitted that in the year 1985, defendant No.1 company approached the replying defendant for sanction of term loan of Rs.75 lacs for purchase of machinery of Unit II. This loan was sanctioned by Zonal Office of the replying defendant vide letter of 29.8.95. It is submitted that the upto 31.3.1999, the total outstanding amount inclusive of interest against the defendants is Rs.3,27,71, 198.00. The loan documents were executed qua the above limits from time to time by the defendant No.1 company. The second term loan for machinery was also secured by first charge on the machinery as well as equitable mortgage of land measuring one bigha 11 biswas belonging to defendant No.1 company. Apart from this the loans are also secured by 1st charge on stocks etc. The second term loan for machinery was also secured by first charge on the machinery as well as equitable mortgage of land measuring one bigha 11 biswas belonging to defendant No.1 company. Apart from this the loans are also secured by 1st charge on stocks etc. It is submitted that from time to time the replying defendant also renewed the personal guarantee of defendant No.1,2 to 4 and all other directors in favour of replying defendant and last such renewal was on 25.9.97. Defendants No.2 to 4 and other directors and guarantors continue to be liable in their personal capacity as guarantors. 5. The plaintiff herein filed replication(s) to the written statement(s) of the defendants, wherein, it denied the contents of the written statements and reaffirmed and re-asserted the averments, made in the plaint. 6. On the contentious pleadings of the parties, this Court on 7.8.2012, struck the following issues interse the parties at contest:- 1. Whether plaintiff is entitled to recover the suit amount or any other amount, if so, from whom and at what rate of interest? OPP. 2. Whether the suit is not maintainable, as alleged? OPD. 3. Whether the plaintiff has not approached this Hon'ble Court with clean hands, as alleged? OPD. 4. Whether the suit is barred by limitation, as alleged? OPD. 5. Whether the plaintiff has no cause of action to file the present suit, as alleged? OPD. 6. Whether the suit is bad for non-joinder of necessary party, as alleged? OPD. 7. Whether the guarantees, if any purportedly executed by the defendants are discharged, as alleged? OPD. 8. Whether the plaintiff is entitled for the amount as claimed for by them in the plaint, when admittedly the proceedings are pending with BIFR? OPD. 9. Relief. 7. For the reasons to be recorded hereinafter, my findings on the aforesaid issues are as under:- Issue No.1....... Yes. Issue No.2........ No. Issue No.3........ No. Issue No.4........ No. Issue No.5....... No. Issue No.6........ No. Issue No.7...... No. Issue No.8....... No. Relief.......... Suit of plaintiff is decreed as per the operative portion of the judgment. Reasons for findings. Issue No.1. 8. In proof of the apposite issues, Mr. Pawan Kumar Bali, Senior Manager in the plaintiff company, in consonance therewith, hence, rendered his testification in his examination-in-chief. No. Issue No.5....... No. Issue No.6........ No. Issue No.7...... No. Issue No.8....... No. Relief.......... Suit of plaintiff is decreed as per the operative portion of the judgment. Reasons for findings. Issue No.1. 8. In proof of the apposite issues, Mr. Pawan Kumar Bali, Senior Manager in the plaintiff company, in consonance therewith, hence, rendered his testification in his examination-in-chief. He has testified in his examination-in-chief, of, on the request of defendant No.1, M/s Oberoi Plastics Ltd., the plaintiff corporation advancing two loans of Rs.32,50,000/- and Rs.21,39,000/-, total Rs.52,89,000/- for setting up its unit, in Tehsil Nalagarh, District Solan, H.P., and, the application for advancement of loan submitted by defendants No.1, being, borne in Ex.PW1/A to Ex.PW1/C. The first installment of loan was stated to have been sanctioned on 10.02.1986, and, the second installment of loan, is testified, to, stand sanctioned, on 4.1.1988, respectively vide letters Ex.PW1/D and Ex.PW1/E, respectively. Loan(s) whereof is stated to have been accepted, by defendant No.1 company, respectively vide Ex.PW1/F and Ex.PW1/G. He has further testified that defendant No.1 Company has signed, two loan agreements borne respectively in Ex.PW1/H and Ex.PW1/J. He has further testified that defendant No.1 company has also signed two hypothecation agreements, respectively, borne in Ex.PW1/K, and, in Ex.PW1/L. He has also testified, that, two guarantee deeds were also executed by defendants No.3, and, 4 in favour of the plaintiff-corporation, guarantee deeds whereof are borne respectively in Ex.PW1/M and in Ex.PW1/N. Later on another guarantee deed, borne in Ex.PW1/O, was executed by defendant No.2 (since deleted). He has further testified, of, an equitable mortgage in respect of the land, and, building, belonging to defendant No.1 company was also created, on behalf the defendant company in favour of the plaintiff corporation, against the title deeds already lying, in deposit, with co-creditor defendant No.5, H.P. Financial Corporation vide letter Ex.PW1/P and Ex.PW1/Q. He has further testified that aforesaid loans were liable to be repaid by defendants No.1 to 4, in half yearly installments between 10.09.1988 to 10.03.1997 @ 12.5 % effective interest per annum with half yearly rests. However, they failed to repay the loan as per the agreed schedule of repayment. However, they failed to repay the loan as per the agreed schedule of repayment. He continues to testify, of, on the request of the defendants, theirs being granted rehabilitation package, borne in Ex.PW1/R1 to Ex.PW1/R.12, and, a revised repayment schedule agreement Ex.PW1/S being executed, and, on the outstanding amount of interest, enhanced rate of interest 13.5% per annum being payable between September 1994 to 2002. He has further testified that defendants No.1 to 4 failed to repay the loan amount even as per the revised schedule. Defendant No.1 company has also raised working capital loan from defendant No.6 Central Bank of India, in respect whereof second charge agreement borne in Ex.PW1/X hence was executed by defendant No.1 company, in favour of defendant No.6. He has continued to testify that on failure of defendants No.1 to 4, to repay the loan amount, a legal notice of 18.9.1998, borne in Ex.PW1/Y was served upon the defendants, acknowledgements whereof borne in Ex.PW1/Z-1 to Ex.PW1/Z-4. However, even despite the notice standing served they have failed to repay the outstanding amount of loan along with interest. He has also testified that defendant No.1 company had applied, to, the Board of Industrial, and, Financial Reconstruction (BIFR), for rehabilitation, but its request was not granted by the Board, and, that it was advised to go for winding up, proceedings whereof are pending adjudication before this Court. 9. It is admitted case of the litigating parties that defendant No.1 company applied to the plaintiff corporation, for, sanction of term loan of Rs.52.89 lacs for construction of factory building, purchase of land, plan and machinery etc., for settling up a industrial unit for the manufacturer of HDPE/pp woven sacks at village Kishanpura, term loan where was sanctioned on 10.02.1986 and 4.1.1988. It is also admitted case of the parties that defendants No.3 and 4 stood guarantors for the aforesaid loan amount. However, defendants No.3 and 4 were proceeded against exparte, yet they, in their written statement, filed, to the plaint, rather disputed, the rate of interest to 15.5 per cent per annum with half yearly rests. It is alleged that the signatures of the defendants, had been obtained, on printed formats of various blank loan documents, and, the blank space regarding rate of interest etc. had been filled in, subsequent, to the signing of the documents by them. It is alleged that the signatures of the defendants, had been obtained, on printed formats of various blank loan documents, and, the blank space regarding rate of interest etc. had been filled in, subsequent, to the signing of the documents by them. There is no evidence existing on record in support of the aforesaid plea(s), as raised by defendants No.3 and 4, except, the bald averments, cast in their common written statement. Moreover, no affirmative suggestion communicating the aforesaid fact, of, the plaintiff corporation, obtaining the signatures of defendants No.3 and 4, on blank loan papers stand put to PW-1 by their counsel, absence whereof is suggestive of the fact, that, the loan documents were duly filled in, at the time when they were executed. Moreover, a reading of loan documents shows that the rate of interest agreed to be paid by defendant No.1 company, hence levying 15.5.% per annum with half yearly rest, with, a rebate of 3%, for timely payments. A further perusal of the records, reveals, that defendant No.1 company, had applied for rehabilitation package, in sequel whereof, a revised agreement, for repayment schedule was executed, on 3.8.1994, agreement whereof is borne in Ex.PW1/S. According to Ex.PW1/S, the principal amount, of Rs.41.99 lacs along with interest @13.5% with half yearly rest, and additional interest @ 4 % in case of default, was agreed to be paid in half yearly installments, by the defendant company. Consequently, the aforesaid plea of the defendants cannot be accepted. On the other hand, the plaintiff's evidence in support of the averments constituted in the plaint, as also, the documents of loan agreements, hypothecation deeds, and, the guarantee deeds appended therewith, rather formidably proves the claim of the plaintiff. In sequel, issue No.1 is decided in favour of the plaintiff and against the defendants. Issue No.2 and 3. 10. No evidence exists on record to show that how the suit of the plaintiff is not maintainable, and, that as to who the plaintiff has not approached this Court with clean hands, hence, both the aforesaid issues are decided in favour of the plaintiff and against the defendant. Issue No.4: 11. Clause 2 of part-I of the loan agreements, bearing the heading ‘Interpretation’, defines the term ‘period of default’. The relevant clause is reproduced hereinafter:- “Period of Default 2. Issue No.4: 11. Clause 2 of part-I of the loan agreements, bearing the heading ‘Interpretation’, defines the term ‘period of default’. The relevant clause is reproduced hereinafter:- “Period of Default 2. ‘Period of Default’ means in respect of: (i) The first installment of principal the period commencing from it s due date and ending with the date of payment thereof: (ii) The first payment of interest the period commencing from the date from which the interest accrues and ending with the date of payment thereof” (iii) A subsequent installment of principal – the period commencing from the date immediately succeeding the date on which the last instalment of principal was paid or due date is which the last payment relates, whichever date is later, and ending with the date on which the interest due has been paid. (iv) A subsequent payment of interest – period commencing from the date immediately succeeding the date on which the last payment of interest was made or the due date to which the payment of interest relates, whichever date is later, and ending with the date on which the interest due has been paid.” 12. From a bare reading of this clause, it is manifest that the ‘period of default’ of first installment, commences, on the date on which the installment, is due, and, ends with the date on which the payment, is made, meaning thereby that it continues till the payment of the said installment is made. As regards the subsequent installments, the period of default commences on the date immediately succeeding, the date of payment of the last installment, of the principal amount or due date of such subsequent installment, whichever date is later and ends, with the date on which the interest due has been paid, meaning thereby that this period continues until the entire amount of interest due is cleared. 13. Admittedly in this case the defendants have failed to pay the loan installments. Thus, the ‘period of default’, even in respect of the installments continued till re-call notice dated 28.9.1998 was issued. The copy of this notice is available at page 184, of, the documents and the defendants have not denied the service of notice upon them. 14. 13. Admittedly in this case the defendants have failed to pay the loan installments. Thus, the ‘period of default’, even in respect of the installments continued till re-call notice dated 28.9.1998 was issued. The copy of this notice is available at page 184, of, the documents and the defendants have not denied the service of notice upon them. 14. Clause 5 of Part-VIII of the loan agreements, speaks of that if a default occurs in the payment of principal or interest or any other payment, required under this agreement, the plaintiff may at its option, by notice in writing hence declare the principal of the loan amount, then outstanding, to be due and payable immediately, and, upon such declaration the principal and interest and other amounts due, shall become payable immediately. 15. As stated here-in-above, the ‘period of default’ in respect of the very first instalment was continuing, when the re-call notice dated 28.9.1998 was issued. 16. Clause 5 of Part-VIII of the agreements, has been the subject of consideration, by two different Single Benches of this Court, in two separate cases, instituted by the plaintiff. The first such case is H.P. State Industrial Development Corporation vs. M/s. Form Techniks (India) Pvt. Ltd. and others, 2001 (3) Shim.L.C. 204 . In this case the Court observed that the clause gives a discretion, to, the plaintiff either to enforce the payment of the amount in respect of which default has been committed or by a notice in writing re-call the entire amount of loan, and, enforce its immediate payment, and, that if a notice of re-call is given, the suit can be filed within three years, of the date of the re-call notice. 17. The second case is H.P. State Industrial Development Corpn. Ltd. vs. Kesri Roller Flour Mills and others, AIR 2002 HP 34 . In this case it has been held that under this clause the plaintiff has the option to declare the principal, due at the time of default, to be payable immediately, by serving a notice in writing, and, on such declaration, the principal amount then payable, the interest, and, all other moneys payable under the agreement, would become due and payable immediately, and, that the cause of action accrues to the plaintiff to institute the suit, on the date of the notice. 18. 18. These two precedents negate the submissions as advanced by the defendant in their apposite written statement of the suit being barred by limitation. Consequently, issue No.4 is decided in favour of the plaintiff and against the defendants. Issue No.5 19. In view of my findings on Issues above, the plaintiff has cause of action to file the instant suit, hence, issue No.5 is decided in favour of the plaintiff and against the defendants. Issue No.6. 20. The defendants have failed to explained as to how the suit is bad for non joinder of necessary parties, hence, issue No.6 is decided in favour of the plaintiff and against the defendant. Issue No. 7. 21. No evidence as been led by the defendants to prove that the guarantees as stand executed by the defendants, are discharged, hence, issue No.7 is decided in favour of the plaintiff and against the defendants. Issue No.8. 22. Defendants have failed to adduce evidence on record to prove that any proceedings are pending with the BIFR, whereas, the plaintiff corporation's witness specifically testified in his testification occurring in his examination-in-chief of defendant No.1 company applying to the Board of Industrial and Financial Reconstruction for rehabilitation and its request standing rejected by the Board, testification remained unshred of its efficacy. Consequently, issue No.8 is decided in favour of the plaintiff and against the defendants. Relief. 23. In sequel to findings on issues aforesaid, the suit of plaintiff is decreed and a decree for a sum of Rs.80,25,529.00 with future interest at the rate of 13.5% per annum with half yearly rests from the date of institution of the suit till the date of payment of the decretal amount, is passed, in favour of the plaintiff and against defendants No.1 to 4. Decree sheet be prepared accordingly. All pending applications also stand disposed of.