IN THE HIGH COURT OF JUDICATURE AT BOMBAY IN THE HIGH COURT OF JUDICATURE AT BOMBAY IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION ORDINARY ORIGINAL CIVIL JURISDICTION ORDINARY ORIGINAL CIVIL JURISDICTION SUMMARY SUIT NO.3456 of 2002. SUMMARY SUIT NO.3456 of 2002. SUMMARY SUIT NO.3456 of 2002. Dena Bank, a Body Corporate Consituted under the Banking Companies (Acquisition & Transfer of Undertakings) Act, 1970 having its Head Office at Makers Tower "E", Cuffe Parade, Mumbai 5 & Branch Office at Dena Sadan, S.V.Road, Kandivli (W), Mumbai 400 067 ..Plaintiff versus 1. M/s. Siddhant Advertising, 47 Bazaargate Street, 1st Floor, Fort, Mumbai 400 001. 2. Shri Prakash H. Gandhi, Partner of Defendant No/1 and as heir and L/R of Shri Hasmukhrai D. Gandhi, the Guarantor since deceased R/A. F/21, Dattani Nagar Bldg. No.1, S.V.Road, Borivli (West), Mumbai 400 092. 3. Shri Ravi Kalicut, 1/13 Madhuram, Vasai (W), District Thane, Maharashtra 4. Smt. Hasumati H. Gandhi Heir & L/R of Shri Hasmukhrai D. Gandhi, the Gurantor since deceased 5. Shri Pradeep H. Gandhi Heir & L/R of Shri Hasmukhrai D. Gandhi, the Gurantor since deceased 6. Shri Ashok H. Gandhi -2- Heir & L/R of Shri Hasmukhrai D. Gandhi, the Gurantor since deceased 7. Shri Kamlesh H. Gandhi Heir & L/R of Shri Hasmukhrai D. Gandhi, the Gurantor since deceased Defendants , 4 to 7 all residing and having their last known address at F/21, Dattani Nagar, Bldg. No.1, S.V.Road, Borivli (West), Mumbai 400 092 ..Defendants Mr.Pandit for the plaintiffs Mr.J.B.Patel for the defendant Nos. 2, 4 to 6 CORAM : R.Y.GANOO, J. CORAM : R.Y.GANOO, J. CORAM : R.Y.GANOO, J. DATED : 24th March, 2009. DATED : 24th March, 2009. DATED : 24th March, 2009. ORAL JUDGMENT ORAL JUDGMENT ORAL JUDGMENT 1. This suit is filed by the plaintiff bank for recovery of Rs.615226.30 and for future interest as per prayer clause (a). Plaintiffs have also prayed for cost of the suit in terms of prayer clause (b). This being a summary suit, Plaintiffs had taken out Summons for Judgment against all the defendants and in the said Summons for Judgment, by Order dated 21.10.2008 defendant Nos.1 to 3 were directed to deposit in this Court a sum of Rs.6,00,000/- and unconditional leave to defend was -3- granted to defendant Nos.4 to 7 and all the defendants were directed to file written statement. The defendant Nos. 1 to 3 have not deposited the sum of Rs.6,00,000/- and have not filed written statement. Defendant Nos. 4 to 7 also have not filed written statement and hence the suit was posted for ex-parte decree. 2. Yesterday, learned Advocate for the plaintiffs had tendered evidence affidavit as well as compilation of documents. Since the suit was taken up for ex-parte decree no formal issues have been framed. I have heard learned Advocate Mr. Pandit appearing on behalf of the plaintiffs and learned Advocate Mr. Patel appearing on behalf of the defendant Nos.2, 4 to 6. 3. Few facts necessary for disposal of this suit are as under: . Plaintiffs, a nationalised bank extended Cash Credit Hypothecation facility to defendant No.1 of which defendant Nos.2 and 3 were partners to the extent of Rs.1,00,000/-. Similarly, plaintiffs extended Baoo Debt Agreement Loan Facility initially to the tune of Rs.1,00,000/- and -4- subsequently that was enhanced to the sum of Rs.3,00,000/-. One Mr. Hasmukhrai D. Gandhi stood as guarantor for the aforesaid loan transaction. It is seen that said guarantor expired before the institution of the suit and that is how his heirs namely defendant Nos. 4 to 7 were joined as defendant. 4. Since the defendant Nos.1 to 3 have not complied with the Order of deposit they were not permitted to file written statement. Defendant Nos.4 to 7 have also not filed written statement though they were permitted to file written statement by way of grant of unconditional leave. Plaintiffs became entitled to an ex-parte decree in accordance with the provisions of Order 37 of CPC. 5. The fact that the plaintiffs had extended loan facility and defendants enjoyed it cannot be disputed by the defendants on the basis of the various documents which came to be executed by the defendant Nos.2 and 3 in their capacity as partners of defendant No.1 as also the original guarantor Mr. Hasmukhrai. The defendants 1, 2 and 3 have executed the letter of acknowledgement on 16.7.1999 and have admitted the liability in regard to the -5- aforesaid two loan transactions and outstanding balance. As a result of this the defendants have admitted the liability to pay the amount. According to plaintiffs, on 30.6.1999 the sum of Rs.65372.89 remained outstanding in regard to Cash Credit Hypothecation transaction and the sum of Rs.329553.50 remained outstanding in regard to Back Date Arrangement, making it together Rs.3,94,926.39. That is to say as of 1.7.1999 the sum of Rs.3,94,926.39 remained outstanding. Since the letter of acknowledgement of liability came to be executed by defendant Nos.1, 2 and 3 on 16.7.1999 institution of the suit on 10.7.2002 for the recovery of outstanding dues will have to be treated as been filed within the period of limitation. 6. The plaintiffs have been able to make out the figure with reference to the outstanding dues on the basis of the documents which came to be produced. The plaintiffs have calculated the interest at the rate of 16.58% on the Cash Credit Hypothecation Facility for the period from 1.7.1999 to 9.7.2002 i.e. upto the date of the institution of the suit at Rs.1,61,267/-. The plaintiffs have also calculated the interest on the Book Debt -6- Agreement for the period 1.7.1999 upto 9.7.2002 to the tune of Rs.31,142/-. The plaintiffs have claimed penal interest on both the outstanding amounts, amounting to Rs.19,936 and 3955/- respectively. That is how the plaintiffs have instituted this suit for recovery of Rs.615226.30. I have heard learned Advocate Mr.Pandit appearing on behalf of the plaintiffs and learned Advocate Mr. Patel on behalf of defendant Nos.2, 4 to 6. Since defendants have not filed written statement and the matter was being taken as ex-parte there was no question of defendants cross examining the witness on behalf of the plaintiffs. The Counsel for the defendant was permitted to argue with reference to facts which can be considered on the basis of record. 7. The learned Counsel for the plaintiffs contended that keeping in view the terms of the promissory note and the rate of interest prevailing from time to time as per the terms of Reserve Bank of India, interest at the rate of 16.28% after the filing of the suit till realization can be granted as the transaction was a loan transaction for allowing the defendants to run their business. -7- 8. The learned Counsel for the plaintiffs did concede that there is no provision for penal interest set out in the agreement and therefore penal interest cannot be levied. Learned Counsel for the defendants tried to submit that the rate of interest charged by the plaintiffs bank is not in terms of agreement and therefore the rate of interest is excessive. 9. On the question of rate of interest since learned Counsel for the plaintiffs conceded that penal interest cannot be levied, there is no question of payment of penal interest. Apart from that there is no material on record to show that the bank could charge penal interest. Hence claim of the plaintiffs to that effect cannot be granted. This has the effect of bringing down the principal amount to Rs.5,91,335.39. 10. As regards interest from the date of filing of the suit till realisation, I am inclined to accept the submission advanced by learned Counsel for the plaintiffs that interest at the rate of 16.58% will have to be granted. Keeping in view the terms of the promissory note as well as the rate of interest charged, depending upon the terms -8- of the Reserve Bank of India, the claim of the plaintiffs will have to be granted. Plaintiffs will ofcourse be entitled to costs of the suit. 19. The defendant Nos.4 to 7 have been joined in their capacity as heirs of original guarantor Hasmukhrai. Since they are being joined as heirs, their liability will have to be restricted to the extent they have succeeded to the estate of deceased Hasmukhrai. To that extent only the plaintiffs will be able to execute the decree against the defendant Nos.4 to 7. Appropriate directions will be given in the decree to be passed hereunder. As the matter was called out today for passing of judgment, learned Counsel Mr. Patel submitted that the bank has accepted the cheque of Rs.10,000/- deposited by the defendant No.2. According to him the bank is willing to settle the dispute. In so far as this aspect is concerned, I wish to pass a decree in the light of aforesaid discussion. After the decree is passed, it is open for any of the defendants to settle with the bank for lesser amount than the actual liability as per the decree which I propose to pass. . For the reasons mentined aforesaid I pass -9- the following decre. DECREE . Defendants jointly or severally do pay to plaintiffs Rs.5,91,335.39. . Defendants jointly or severally do pay to plaintiffs interest at the rate of 16.58% per annum on Rs.5,91,335.39 from the date of the filing of the suit till realisation. . Defendants jointly or severally do pay to plaintifs costs of this suit. . It is hereby ordered that the plaintiffs will be able to execute this decree against the defendant Nos.4 to 7 to the extent of the assets to which defendant Nos. 4 to 7 have suceeded that of late Hasmukhrai D. Gandhi. (R.Y.Ganoo, J.) (R.Y.Ganoo, J.) (R.Y.Ganoo, J.)