-1- IN THE HIGH COURT OF JUDICATURE AT BOMBAY IN THE HIGH COURT OF JUDICATURE AT BOMBAY IN THE HIGH COURT OF JUDICATURE AT BOMBAY CIVIL APPELLATE JURISDICTION CIVIL APPELLATE JURISDICTION CIVIL APPELLATE JURISDICTION FIRST APPEAL NO.598 OF 1993 FIRST APPEAL NO.598 OF 1993 FIRST APPEAL NO.598 OF 1993 The State of Maharashtra, .. Appellant. Vs 1. Bank of Maharashtra, Br Office at Umbraj Taluka Karad, District-Satara. 2. Ajinkyatara Yantramag Vinkar Sahakari Society Ltd, Chaphal Taluka Patan, Dist- Satara .. Respondents. Mrs G.P.Mulekar, AGP, for the appellant. Mr N.N.Bhadrashete, for respondent no.1. Mr Mahendra Moholkar, for respondent no.2. CORAM : B.H.MARLAPALLE & D.B.BHOSALE,JJ. CORAM : B.H.MARLAPALLE & D.B.BHOSALE,JJ. CORAM : B.H.MARLAPALLE & D.B.BHOSALE,JJ. DATE : 10/09/2008 DATE : 10/09/2008 DATE : 10/09/2008 ORAL JUDGMENT: ORAL JUDGMENT: ORAL JUDGMENT: (Per B.H.Marlapalle,J.) (Per B.H.Marlapalle,J.) (Per B.H.Marlapalle,J.) 1. This Appeal filed by the State of Maharashtra -original Defendant no.2, is directed against the Judgment and decree passed by the learned II Joint Civil Judge, Sr.Dn., at Satara on 29.8.1992 in Special Civil Suit No.175 of 1989. The defendants have been jointly and severally directed to pay an amount of Rs.12,10,000/- to the plaintiff-Bank, the present respondent no.1, with future interest at 12.5 per cent on the principal amount of Rs.2,95,229.22 from the date of filing of the suit till realisation of the decreetal amount. -2- 2. Under the Fourth Five Year Plan, the present appellant-original defendant no.2 was allocated Power- looms by the Union of India and defendant no.1 was formed and registered on 25.7.1975. Its Chairman had approached the plaintiff-Bank on 30.3.1978 and submitted an application for a Term Loan of Rs.4,25,000 for the purchase of machinery. The Chairman executed Demand Promissory Note of Rs.4,25,000/- on sanction of the said loan and agreed to pay 3.1/2 percent interest with quarterly rests. An agreement for hypothecation was executed and thereby defendant no.1-borrower had hypothecated all its machinery, movable and assets and implements etc. for the security of repayment of the loan. The present appellant and defendant no.2 stood guarantee and they executed Guarantee Bond on 16.7.1977 in favour of the plaintiff-Bank and thereby guaranteed the due repayment of Rs.5,82,500/-. An amount of Rs.1,20,292.22 was, as per the instructions of the borrower, released by the plaintiff-Bank in favour of the Central India Machinery Manufacturing Co Ltd and similarly an amount of Rs.1,62,500/- was also released at the request of the borrower to the Maharashtra State Powerlooms Corporation. A further amount of Rs.12,500/- was also released in favour of the said Corporation by the plaintiff-Bank and thus from the sanctioned loan of Rs.4,25,000, an amount of Rs.2,95,229.22 came to be -3- released. As on 20.3.1981 the amount due from the borrower to the plaintiff-Bank came to Rs.3,63,164.95. The Manager of the borrower executed a writing on 20.2.1981 and thereby accepted the liability of Rs.3,63,164.95. On 21.7.1983 the Chairman of the borrower society further accepted in writing the liability of Rs.4,91,163.35. On 12.7.1986 another letter was issued by the Chairman and thereby accepting the liability of Rs.7,25,974.80. The Bank issued a notice on 27.3.1989 to both the defendants, i.e. the borrower as well as the guarantor and on or about 1.7.1989 Special Civil Suit No.175 of 1989 was filed for the recovery of Rs.12,10,000/- with interest. 3. Defendant no.1 resisted the suit by filing its Written Statement at Exhibit 16 and took a preliminary objection to the jurisdiction of the civil Court on the grounds that the plaintiff-Bank had already become a member of the borrower society before the suit was filed and, therefore, it was required to file a dispute under section 91 of the Co-operative Societies Act before the Co-operative Court. On merits, it contended that only an amount of Rs.2,95,229/- was released and the Bank refused to release the remaining amount, as a result of which the society could not start its operation and sustained losses. Defendant no.2, the State of Maharashtra, filed -4- its Written Statement at Exhibit 50 and raised two issues on the jurisdiction of the court to entertain the suit. The first one was on relying upon the scheme of section 91 of the Maharashtra Co-operative Societies Act and secondly it was contended that as per clause (9) of the Guarantee Bond the Court at Bombay has jurisdiction for enforcing the guarantee. It was also contended that a notice under section 80 of the Civil Procedure Code was not issued before the suit was filed and on that ground also the suit was not maintainable against defendant no.2. The learned Judge of the trial Court framed the following issues and answered them accordingly. 1. Whether this Court has jurisdiction to entertain and try this suit? 2. Whether the claim of the plaintiff is hit by the principle of "Damduppat"? 3. Whether the suit is within limitation? 4. Does Defendant no.1 prove that interest in the present case has not been properly calculated? 5. What are the dues to the plaintiff from the defendants? 6. Is defendant no.1 entitled to the grant of instalments? If yes, in what manner? 7. Waht order and decree? Additional Issues:- Additional Issues:- Additional Issues:- 3A. Whether the suit is bad for non-joinder of necessary party as contended by defendant no.2 in para 3 of the W.S. (Exh.50)? -5- 3B. Whether the suit is bad for want of notice u/s 80 of the C.P.C.? 3C. Does the plaintiff prove that defendant no.1 executed an acknowledgment of the dues on 20th March, 1981 as alleged? 3D. Whether the plaintiff has charged interest properly? 3E. Does the defendant no.2 prove that the guarantee is revoked and hence defendant no. 2 is not liable to the suit claim? . The trial Court held that it had jurisdiction to entertain the suit; the suit was filed within limitation; the guarantee bond was executed; the suit was not bad for non-joinder of necessary party. It also turned down the contention that the suit was bad for want of notice under section 80 of the Civil Procedure Code. It specifically held that the State of Maharashtra failed to prove that the guarantee was revoked and, therefore, it was not liable to the suit claim. 4. We have heard Mrs Mulekar, the learned AGP and Mr Moholkar for the borrower. The Bank Examined Shri Shrikant Joshi, Manager, Pusegaon Branch. Defendant no.1 borrower examined shri Jafar Gulabbhai Mulla, Regional Manager of Maharashtra Powerlooms Corporation as its sole witness. In his deposition PW 1 Joshi stated that the plaintiff-Bank had applied for the membership of the -6- borrower society on 25.3.1988 and it was granted on 31.8.1988. Obviously, when the loan was sanctioned and an amount of Rs.2,95,229/- was released the Bank was not a member of the borrower society. The last confirmation of the outstanding dues under the signature of the Chairman of the borrower society was on 12.7.1986 and even on that date the plaintiff Bank was not a member of the borrower society. The trial Court, therefore, rightly held that the remedy as available under section 91 of the Maharashtra Co-operative Societies Act was not available to the plaintiff-Bank and it rightly filed the suit before the competent civil Court. On the issue of limitation there is no dispute that the suit was filed on 1.7.1989 and, as noted earlier, the last confirmation of the outstanding loan amount is dated 12.7.1986 and thus the suit was filed within a period of three years. Coming to the scheme of clause (9) of the Guarantee Bond, the trial Court referred to the decision of the Apex Court in the case of Michael Vs Sirajuddin, A.I.R.1963 SC 1044 and a decision of the Gujarat High Court in the case of Snehalkumar Sarabhai Vs E.T.Organisation, AIR 1975 Gujarat 72 and it held that while parties can lawfully enter into an agreement to restrict a dispute to a particular court having jurisdiction, such a stipulation though valid cannot take away the jurisdiction of the court which admittedly has the territorial jurisdiction. Such a -7- clause restricting jurisdiction could not tie the hands of the Court and denude it of the power to do justice. There is no dispute that the borrower society is located within the territorial jurisdiction of the learned Civil Judge, Sr Dn, at Satara and, therefore, in our opinion the trial Court did not commit any error in holding that it had jurisdiction to entertain and decide the suit. 5. Coming to the merits, as noted earlier, from time to time the Chairman of the borrower society went on confirming the outstanding dues by written communication and all those documents were placed on record before the trial Court. Even the claim of Rs.12,10,000/- was accepted in writing by the Chairman of the borrower society. The society did not examine either the Chairman concerned at the relevant time or any of its employees. Its sole witness in the cross-examination admitted that the borrower had not paid even the first instalment of the amount of loan released. It was also pointed out that the Powerloom Corporation granted loan of Rs.2,87,000/- to the society so as to start its operation. On the face of the admissions about the outstanding loan amount there was no reason even to reduce the claim made by the plaitniff-Bank. We, therefore, do not find any error, illegality or infirmity in the impugned judgment and decree and the same requires to be confirmed. -8- 6. In the premises, this Appeal fails and the same is hereby dismissed. Interim order, if any, stands vacated. Costs in cause. (D.B.BHOSALE, J.) (D.B.BHOSALE, J.) (D.B.BHOSALE, J.) (B.H.MARLAPALLE,J.) (B.H.MARLAPALLE,J.) (B.H.MARLAPALLE,J.)