:1: IN IN IN THE THE THE HIGH COURT OF JUDICATURE AT BOMBAY HIGH COURT OF JUDICATURE AT BOMBAY HIGH COURT OF JUDICATURE AT BOMBAY CIVIL APPELLATE JURISDICTION FIRST APPEAL NO.133 OF 1992 WITH FIRST APPEAL NO.1119 OF 1994 WITH CIVIL APPLICATION NO.984 OF 1992 IN FA NO.1119/1994 Shri. Vijay Dashika Char. ..Appellant. Vs. Bank of Maharashtra. ..Respondent. FIRST APPEAL NO.1119 OF 1994 B.A. Hathikhanvala of Delhi Indian Inhabitant, residing at C-12, Preet Vihar, Indraprastha Extension, New Delhi 110 092. ..Appellant. Vs. Bank of Maharashtra, a statutory nationalised bank having its Head office at Lokmangal, 1801 Shivaji Nagar, Poona 411 005 and one of its Branch ZOffices at Deccan Gymkhana, Pune-4. ..Respondent. CIVIL APPLICAATION NO.984 OF 1992 B.A. Hathikhanawala. ..Applicant. Vs. Bank of Maharashtra and ors. ..Respondents. Mr.B.B. Saraf with R.P. Badiani i/by Negandhi Shah & Himayutallah for the Appellant in F.A.No.133/1992. Mr. M.P.Rao i/by Vigil Juris for the Appellant in F.A.No.1119 of 1994. CORAM: R.S. MOHITE, J. DATE : 1st October,2008 :2: ORAL JUDGMENT : 1. Both these first appeals impugn the same judgment and order passed by the Civil Judge, Senior Division, Pune on 25.9.1991 in Special Civil Suit No.226 of 1982 and hence, both are being disposed off by this common judgment. By the impugned judgment and decree, the plaintiff’s suit for a monetary claim has been decreed with costs against the defendants and the defendants have been directed to jointly and severally pay an amount of Rs.4,42,730/- to the plaintiff bank with future interest thereon at the rate of 18% per annum from the date of the suit till realization of the entire decretal amount. 2. At the very out set, it may be stated that the matter was heard on 30.9.2008 when the Advocate for the respondent-bank was absent. Matter was stood overnight part-heard in the hope that the advocate for the respondent will appear. Today none appears for the respondent. In the circumstances, I am constrained to go through the record with the assistances of the advocates for the two appellants. I have perused the entire record. 3. The brief facts of the case were as under: :3: a) That the plaintiff i.e. Bank of Maharashtra is a nationalised bank and as the original defendant No.1 which was a private limited company M/s. Micro Pistone & Rings Ltd. was in need of financial assistance, the plaintiff bank granted to the defendant No.1 Cash Credit facility of Rs.2,50,000/-. By way of security, on 12.3.1975, the defendant No.1 had executed in favour of the plaintiff bank, a Demand Promissory Note for the sum of Rs..2,50,000/- agreeing to pay the said amount along with interest thereon at the rate of 7% over bank rate of 16% per annum at quarterly rests for the value received. On 12.3.1975, the defendant No.1 also executed a continuing security agreement in favour of the plaintiff bank. b) On 1.3.1975, the balance at the foot of the account was Rs.41,439.22ps. The plaintiff informed defendant No.1 that the Cash Credit facility was reduced to Rs.1.00 lac and this reduction of limit was accepted by defendant No.1. That, thereafter according to the plaintiff bank, the defendant No.1 offered defendant Nos. 2 to 6 as guarantors and these guarantors under took and gave a personal guarantee to repay the balance amount that may be found at the foot of the cash credit account. That, defendant Nos. 1 to 6 and one Mr. L.D.Char acknowledged this arrangement in writing on :4: 1.3.1976 under their signatures, agreeing to repay the plaintiff, the due sum of Rs.41,439.22ps. They also executed a Demand Promissory note on 1.3.1976 in favour of the plaintiff bank for an amount of Rs.1,00,000/- agreeing to pay the said amount together with interest at the rate of 8% over bank rate with quarterly rests. The defendant Nos. 1 to 6 also executed on 1.3.1976 a Continuing Security Agreement and a Guarantee Bond in favour of the plaintiff bank. According to the plaintiff-bank, the balance as on 10.7.1976 was Rs.1,69,517.02ps. inclusive of interest as on 10.7.1976. The defendant Nos. 1 to 6 and late Mr. L.D.Char admitted the said balance and accepted their indebtness in writing under their signatures and the defendant No.1 requested the plaintiff bank to enhance the Cash Credit facility to Rs.2,00,000/-. The defendant Nos. 2 to 6 and late L.D.Char executed a Demand Promissory note in favour of the plaintiff bank for the sum of Rs.2,00,000/- on 10.7.1976. They also executed an Continuing Security Agreement in favour of the plaintiff bank. On the same day, they also executed in favour of the bank a Guarantee bond. c) The plaintiff bank contended that as on 20.3.1979 the balance in the suit account was Rs.2,86,112.32ps. exclusive of interest from 1.1.1979. The defendant No.1 then offered the defendant No.8 and :5: one Dashrath Rao Sasane since deceased as additional guarantors. They also under took a personal liability to pay the dues accrued in the suit account of the plaintiff bank. The defendant Nos. 1 to 6 and 8 late Mr. L.D.Char and late Shri.Dashrathrao Sasane accepted their indebtness in writing and agreed to repay the due amount. d) The record indicates that, on 20.9.1979 an application was made to the plaintiff bank for sanction of cash credit facility of Rs.2,86,112.32, on the strength of the security documents as mentioned therein. This was signed by the Managing Director and also signed by several other defendants including the present appellants. Same parties also executed another document confirming the due balance of Rs.2,86, 112.32. They further signed a Promissory Note dated 20.3.1979, the text of which was as follows: "On demand I M/s. Micro Pistons and Rings Ltd. promise to pay Bank of Maharashtra, or order, in Poona or wherever demanded the sum of Rupees Two Lakhs eighty six thousand one hundred twelve and paise thirty two only together with interest on such sum from this date at the rate of 6 per cent over Bank Rate minimum fifteen per cent per :6: annum with half yearly/quarterly rests for value received". e) It was the case of the plaintiff bank that since the amount due to the bank at the foot of the suit account was not paid, they were compelled to file a suit for recovery of Rs.4,42,730/- with future interest thereon. 4. It appears that only defendant No.3 had filed a written statement and denied the liability to make payment. He denied that he had agreed to pay the plaintiff bank Rs.2.00 lacs with interest as alleged. Various other points were raised by the defendant No.3 in his written statement. It was denied that the defendant No.3 was guarantor and was liable to pay the amount due. 5. After the framing of issues, evidence was led in the suit. On behalf of the plaintiff bank, the first witness examined was a clerk serving in the bank by name Prakash Pansare. Second witness for the plaintiff was Prabhakar Khedekar who was a clerk serving in Deccan Gymkhana Branch at the relevant time. On behalf of the defendant Nos. 3 and 7, one witness by name Vijay Char :7: who was at the relevant time, a Director of the defendant No.1 came to be examined. 6. Based upon the oral and documentary evidence produced by both the parties, the trial court passed the impugned judgment and decree. The decree passed by the trial court is as under : "The suit is decreed with costs against all the defendants as under. All the defendants do pay jointly and severally an amount of Rs.4,42,730/- to the plaintiff bank with future interest thereon at the rate of Rs.18% p.a. from the date of suit till realization of the entire decretal amount. . A decree be drawn up accordingly." 7. After hearing the Advocate for the appellants and perusing the entire record, in my view, both the appeals deserve to be allowed. It is seen from the record that, though the bank had contended that the appellants had executed a guarantee bond and were guarantors, this issue was decided in the negative by :8: the trial court against both the appellants. At the trial, no guarantee bond was produced by the bank before the court. The suit stands decreed against the present appellants on the sole ground that they had put their signatures on the promissory note executed for the purpose of security for obtaining the cash credit facility which was granted. On perusal of the promissory note, I find that the promise was made by Micro Piston and Rings Ltd. and there is no promise made individually by either of these two appellants. The Promissory note dated 1.3.1976 was at Exh.61 and it is clear that promise to pay on demand was made by Micro Pistons and Rings Ltd. alone. It is admitted by the plaintiff bank that the cash credit facility was given only to defendant No.1. There was no personal cash credit facility granted to any of the directors. Merely, because the directors including the appellants signed on the promissory note would not render the promise made in the documents, a personal promise on the part of each individual director. 8. The documents produced by the bank made it abundantly clear that the facility was only given to to the company and was not a personal facility in favour of any individual director. It is in this context, that the plaintiff had come with the case that the directors including the appellants in both the appeals were :9: guarantors. But this case having been negatived, the court was in error in holding that the directors had a personal liability to repay the due amount to the bank. 9 . In this connection, it is desirable to refer to certain admissions given by both the witnesses examined by the plaintiff-bank. P.W.No.1 Prakash Pansare who was a clerk working in the bank in Para-7 of his deposition stated as under. "It is correct to say that there is a printed guarantee form in our branch. It is correct to say that such printed forms are available in each and every branch. It is correct to say that on such printed guarantee forms, a signature of guarantor is obtained by affixing adhesive stamp of Rs.5/-. It is correct to say that contracts of guarantee are always written. We are not authorised to enter into any oral contract of guarantee. Now I have inspected all the documents filed by the plaintiff bank along with list Exh.3,42 and 52 and I do not find any guarantee bond in respect of the suit transaction". :10: 10. P.W.No.2 Prabhakar Keshav Khedekar was another clerk examined by the plaintiff bank . During his cross examination, in Para-5 of his evidence, this witness stated as under: "It is correct to say that whenever loan is demanded an application in writing has to be given to the plaintiff bank. There are such printed application forms for demanding loan printed by the bank. It is correct to say that there is provision to mention whether it is a loan for single debtor or for joint borrowing. It is correct to say that in such application the names of all co-borrowers are to be mentioned. I have not seen the application made by the defendants to the plaintiff bank for the suit transaction. I do not know whether the said application was of single debtor or joint borrower. I only know that the defendant No.1 is borrower and the defendant Nos.2 to 9 are its guarantors but I cannot state whether the defendant Nos. 2 to 9 are or are not joint borrowers or co-borrowers". 11. From the aforesaid evidence, it becomes very clear that the case of the bank was not that any of the :11: director including the present appellants were co borrowers. Their case was limited to a contention that they were guarantors. This issue has been decided against the bank. The Trial Court ought to have dismissed the plaintiff’s suit as against the directors. 12. In the result, appeals must be allowed. It is however, being made clear that the impugned judgment and decree is quashed and set aside only against the appellants. The appeals are disposed off. There will be no order as to costs. ( R.S. MOHITE, J.) CIVIL APPLICATION NO.984 OF 1992 IN FIRST APPEAL NO.1119/1994 1. In view of the above judgment, civil application No.984 of 1992 for stay of the execution of the exparte decree dated 25.9.1991 is infructuous and stands disposed off. (R.S. MOHITE, J.)