R.S.A. No.1493 of 2008 (O&M) -1- In the High Court of Punjab and Haryana at Chandigarh R.S.A. No.1493 of 2008 (O&M) Date of Decision:October 05, 2009 M/s Union Advertising Services and others ---Appellants versus Allahabad Bank ---Respondent Coram: HON'BLE MRS. JUSTICE SABINA *** Present: Mr. Inderjit Sharma, Advocate, for the appellants Mr.Ram Chander, Advocate, for respondent-bank. *** SABINA, J. Plaintiff – Allahabad Bank had filed a suit for recovery of Rs. 3,85,166.00. Additional Civil Judge (Sr. Division), Ambala Cantt. vide judgment and decree dated 8.9.2005 decreed the suit of the plaintiff. Aggrieved by the same, defendants preferred an appeal and the same was dismissed by District Judge, Ambala vide judgment and decree dated 23.11.2007. Hence, the present appeal by the defendants. The facts of the case as noticed by the learned District Judge, R.S.A. No.1493 of 2008 (O&M) -2- in paras 2 to 4 of its judgment read as under:- “In brief, plaintiff filed suit with the allegations that defendant No. 1 is a sole proprietary concern of defendants No. 2, besides defendant No. 2 is also successor-in-interest and legal representative of Avtar Singh Duggal. Avtar Singh Duggal and defendant no. 3 stood as guarantors for repayment of loan advance to defendant No. 1, while defendant No. 4 who was only Manager(Accounts) of defendant No. 1. It has been submitted that defendant No. 1 through defendant No. 2 was allowed over draft facility to the tune of Rs. 4,50,000/- against the security of Fixed Deposit Receipts of Rs. 6 lakhs overdraft limit to the tune of Rs. 1,50,000/- against hypothecation of Bool Debts at the rate of 17% per annum with quarterly rests, repayable on demand, on personal guarantee of Avtar Singh Duggal and defendant No. 3 Mrs. Ramnik Duggal, inter alia on the conditions that the borrowers shall submit monthly statement of book debts and drawings shall be regulated with drawing powers, drawing powers were to be calculated on the basis of book debts not exceeding three months, the borrower was to confine its financial dealings with plaintiff bank only and would not have financial dealings/arrangements with any other bank without prior consent of the plaintiff etc. In order to secure the aforesaid credit facilities defendant no. 2 as proprietor of defendant No. 1 executed a General letter of Hypothecation dated 13.3.1991 for a valuable consideration of Rs. 1,50,000/- hypothecating entire stock in trade and R.S.A. No.1493 of 2008 (O&M) -3- moveable properties including plaints, machinery, apparatus, tools, stores and spares, cars, stock of raw material, stock in process, finished goods and all office merchandise and all other book debts outstanding due to them or become due as security for repayment of loan along with interest and other charges. The interest agreed was 7% per annum above the Reserve Bank India rate for demand loans applicable from time to time with a minimum of 17% per annum with quarterly rests calculated on daily balance and charged to the account on last working day of month or otherwise in accordance with the practice of the bank. The defendants were to pay the balanced outstanding in the said account on demand with interest at the aforesaid rate till payment and the borrowers were to furnish and verify statement, report, returns, certificate etc., from time to time as required by the bank and execute necessary documents. It has further been submitted that overdraft facilities were being availed by defendant No. 2 in the name of defendant No. 1 against the security of pledge of FDRs since 14.1.1985 and later the limit was allowed to the extent of Rs. 4,50,000/- at the time of execution of security documents on 13.3.1991, a sum of Rs. 6,59,938.52 Ps. was transferred to the cash credit (Book Debt) Loan Account at the request of defendant No.1 through defendant No.2, it was promised to bring down the amount of CC Book Debt Limit to the sanctioned limit of Rs. 1,50,000/- and a Demand Promissory Note for a sum of Rs. 2,09,938.52 Ps along with interest at the R.S.A. No.1493 of 2008 (O&M) -4- rate of 7% per annum over Reserve Bank of India rate with a minimum of 17% per annum with quarterly rests were executed. It has been submitted that Shri Avtar Singh Duggal, father of defendant No. 2 and defendant No. 3 executed a letter of Continuing Guarantee for a consideration of Rs. 1,50,000/- holding themselves liable to pay the outstanding loan amount jointly and severally against defendant No. 1 and defendant No. 2. They also agreed that guarantee shall be continuing irrevocable, coextensive and coexisting with defendants No. 1 and defendant No. 2 and acknowledgment of debt by borrowers or through their authorized agent would be binding on the guarantors, as if it was on their behalf. Upon execution of documents, defendants agreeing to terms and conditions, allowed defendants to avail the aforesaid credit facilities from time to time as shown in the Statement of Accounts. It has been submitted that defendants No. 1 and 2 did not fulfill their obligations for submission of daily book debt statements etc. and despite requests failed to regularized the account, the defendants did not regularize their account nor adjusted the amount within the sanction limit of one year. Letters dated 23.7.1992, 4.8.1992, 18.11.1992 (two letters), 20.11.1992, 19.12.1992, 3.6.1993, 11.6.1993, 19.8.1993, 28.8.1993, 24.11.1993, 18.12.1993, 25.5.1993, 19.7.1994, 22.8.1994, 28.9.1994, 27.10.1994, 12.11.1994, 16.12.1994, 6.2.1995, 25.2.1995, 21.8.1995, 21.11.1996 and 7.10.1997 exchanged between plaintiff and defendants. The defendants despite R.S.A. No.1493 of 2008 (O&M) -5- acknowledging the liability having been postponing repayment on one pretext or the other lastly on receipt of letter dated 21.8.1995, defendants made their conduct clear when they agreed to pay only Rs. 1,50,000/- i.e. a sanctioned limit towards full and final settlement without any interest and that too in thirty monthly instalments. Plea was that the FDRs were not discounted despite the fact that they had already been discounted as requested by defendants and intimation given to the defendants. It has been submitted that pursuance to the sanction of Cash Credit Facility to defendant No. 1 through defendant No. 2, accounts were opened on 14.1.1985 and 13.3.1991 respectively, which were regularly maintained and credit entries were made correctly, in the regular and usual course of business of banking, After making adjustment of part payments made by defendants, a sum of Rs. 3,85,166/- was outstanding against the defendants with interest applied up to 20.10.1997 in Cash Credit Book Debt Loan Account, however, Cash Credit Overdraft Account was adjusted. Thus, defendants were liable to pay Rs, 3,85,166/- along with interest up to date from the date of suit till realization along with pendent elite and future interest at the rate of 15% per annum with quarterly rests till realization. The liability of defendant No. 3 was stated to be coextensive with defendants No. 1 and 2 and joint and several of all the defendants. 3. On notice being issued, defendants contested the suit by filing written statement, raising preliminary objections R.S.A. No.1493 of 2008 (O&M) -6- regarding concealment of facts. On merits, it was denied that plaintiff bank was a banking company or that Mohan Singh was Senior Manager and competent to sign and verify the plaint. Plaint was submitted not to be properly signed and verified. The liability of defendants No. 3 and 4 was stated to be wrong as they have wrongly sued. Denying other allegations, it was submitted that plaintiff did not deliberately cooperate with defendants and deprived the defendants from Overdraft limit and Cash Credit Facility and thus, caused undue harassment and loss of business to defendants. Execution of documents were denied, submitting that plaintiff had converted blank documents to suit their convenience, Rate of interest was stated to be exaggerated and not agreed upon. The transfer of balance amount to Cash Credit was submitted to be wrong and afterthought. The execution of Guarantee by defendants No. 3 was stated to be false. It was denied that guarantee was to be continuing, irrevocable and coextensive with defendants No. 1 and 2. The documents were submitted to have been manipulated by plaintiff. It was denied that any terms and conditions were agreed as mentioned in the plaint. Copies of State of Accounts were submitted not to have been supplied and thus, stated to be not correct. It was submitted the defendants have been making requests since 1990 to discount FDRs of the value of Rs. 4,01,205/- and to adjust amount in the loan account of defendants, however, plaintiff failed to R.S.A. No.1493 of 2008 (O&M) -7- deliberately and had the plaintiff discounted FDRs at appropriate stage, the entire loan amount would have been adjusted. Thus, any liability after 29.11.1990 was denied. It was denied that any amount was due or that defendants did not adhere to the financial discipline of the bank. Denying their liability and any cause of action, dismissal of suit was prayed.” On the pleadings of the parties, trial court framed the following issues:- “(1)Whether the plaintiff is entitled for a decree for the recovery of Rs. 3,85,166/- along with interest? OPP (2)Whether plaintiff has not come with clean hands and suppressed the true facts, if so, its effect? OPD (3)Whether the plaintiff has mala fide filed the present suit without any basis and the plaint is liable to be rejected under Order 7 rule 11 of CPC?OPD (4)Whether the plaintiff has converted blank and unfilled documents?OPD (5)Relief.” After hearing learned counsel for the parties, I am of the opinion that the present appeal deserves to be dismissed. Admittedly,the plaintiff had advanced loan facility of two overdraft limits to the defendant-appellants to the tune of Rs. 4,50,000/-and Rs.1,50,000/-.The case of the defendants was that they had asked the bank to cancel the FDRs and adjust the receipts in the loan amount. Had the bank discounted the FDR in the year 1990 itself, no amount would have been due against the defendants- appellants. However, the case of the R.S.A. No.1493 of 2008 (O&M) -8- plaintiff-bank was that after writing letter Ex. DW1/B, defendants- appellants had executed fresh documents in the year 1991. Learned District Judge in para 11 and 12 of its judgment has observed as under:- “11. Though, vide letter Ex. DW1/B dated 21.11.1990, defendants had sought discounting of FDRs and adjustment of the amount, however, execution of fresh documents by defendants on 28.1.1991, when fresh loan documents were executed, which was pursuance to the letter written by plaintiff inviting defendants for discussion, certainly defendants considering the pros and cons of discounting of FDRs prematurely, executed loan documents. Request for sanction of bool debt on 20.12.1990 Ex. P.1, affidavit on 12.2.1991 Ex. P- 4,Letter of Hypothecation Ex. P.5 on 13.3.1991, Demand Promissory Note Ex. P7 on 13.3.1991 and other necessary documents were executed. Even defendant No. 3 and Avtar Singh executed fresh Deed of Guarantee Ex. P6 on 13.3.1991. thus, when defendants themselves had executed fresh loan documents, may be by realizing pros and cons of discounting of FDRs prematurely or for any other reason, it does not lied in their mouth that had the FDRs been discounted at that stage. The entire loan would have adjusted. Even otherwise, even at that stage, as per Statements of Account Ex. P.25 and Ex. P.26 the amount outstanding was much more that the discounting value of FDRs. Perusal of statement of Account Ex. P.25 shows that FDRs were discounted on 18.12.1993 and after adjusting the amount, the O.D. Account had a credit of Rs. R.S.A. No.1493 of 2008 (O&M) -9- 390/- which was transferred as credit to the C.C. account, which was also in debit. Therefore, the contention of learned counsel for the appellants that had the FDRs been discounted and adjusted, the balance would have been brought to 'zero' is not tenable. 12. It may not be out of place to mention that defendants- appellants examined Sh. Bhupinder Singh, Chartered Accountant, as DW-2, who prepared a statement of account Ex. D3 and placed on file to contend that no amount would have been due, however, even this witness on being cross examined admitted that the difference in the calculation of statement of account filed by plaintiff would work out only 9 paise which ultimately would not have made any difference. He also admitted that there was no error in calculation difference and that difference would work out only 9 Paise, which would not have made much difference, contention of defendants- appellants that discounting would have brought balance to Nil was not acceptable. It is not the case of defendants-appellants that they did not raise any loan or that they had repaid entire outstanding. The execution of documents after writing of letter Ex. DW1/B would not only amount to waiver of this letter, but implied acceptance of the amount mentioned in the loan documents executed thereafter. Therefore, there does not appear to be any ambiguity in the amount outstanding worked out while filing the suit by plaintiff bank.” Thus, both the courts below had rightly decreed the suit of the R.S.A. No.1493 of 2008 (O&M) -10- plaintiff-bank. Defendants-appellants had executed fresh loan documents on 28.1.1991 although they had initially written a letter dated 21.11.1990 seeking discounting of FDRs and adjustment of the amount due. No substantial question of law arises in this appeal. Accordingly, this appeal is dismissed. (SABINA) JUDGE October 05, 2009 PARAMJIT