IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION SUIT NO.1660 OF 1989 CANARA BANK, a body Corporate constituted, established and functioning under the Banking Companies (Acquisition and transfer of Undertakings) Act, 1970, having its Head Office at Bangalore, Karnataka State and also amongst other Branches a Branch Office at Khetwadi, Mumbai-400 004. ..Plaintiffs. Vs. 1. M/s.S.A.Industries, Mumbai. 2. Mrs. Alpha A. Joshi, Mumbai. 3. Ashok R. Joshi, Mumbai. ..Defendants. .... Mr.R.C. Dubey, a/w. Sanjeev Kanchan, for the Plaintiffs. Mr. Jayesh Bhatt, for the Defendants. .... CORAM CORAM CORAM : A.S.OKA, J. : A.S.OKA, J. : A.S.OKA, J. DATE DATE DATE : 08th & 10th October 2008. : 08th & 10th October 2008. : 08th & 10th October 2008. ORAL ORAL ORAL JUDGMENT : JUDGMENT : JUDGMENT : . The plaintiff bank has filed this suit for recovery of a sum of Rs.01,95,573.35/- together with interest thereon at the rate of 20% per annum with quarterly rests on the principal amount of Rs.01,90,058/-. 2. The case of the plaintiff in short is that on the request made by the first and second defendants, the plaintiffs bank sanctioned and granted an open cash 2 credit limit of Rs.60,000/- to the first and second defendants alongwith the other types of credit limit. The first defendant is the proprietory concern of the second defendant. Reliance has been placed in the plaint on a demand promissory note executed by the second defendant on 18th February 1995 in favour of the plaintiffs and letter of request signed by the second defendant on 18th February 1985. Reliance is also placed on the agreement of the same date executed by the second defendant on behalf of the first defendant by which the said defendants agreed to repay the amount advanced at the rate of 4% per annum above the Reserve Bank of India rate subject to the minimum rate of 14% per annum. Under the said agreement, it is contended that first and second defendants hypothecated their stocks lying in the premises at 25-A, Nand Dham Industrial Estate, Andheri (East), Mumbai. It is alleged that the third defendant alongwith one Mr. P.R.Joshi executed a letter dated 18th January 1985 guaranteeing repayment of a sum of Rs.01,60,000/- and it is stated that the said guarantee is a continuing guarantee. 3. According to the case of the plaintiff, a fresh set of documents was executed by the second defendant on 3 behalf of the first defendant on 01st January 1988. It is stated that the third defendant executed a letter of guarantee dated 01st January 1988 in favour of the plaintiffs bank thereby guaranteeing repayment of the amount upto a sum of Rs.4,00,000/-. 4. As the defendants committed defaults in repayment of the amount advanced, by advocate’s notice dated 26th September 1988, the plaintiffs called upon the defendants to pay the outstanding amount with interest thereon at the rate of 16.5% per annum. Thereafter, the present suit has been filed as the defendants failed to comply with the requisitions in the notice. 5. A written statement was filed by the first to third defendants. The first contention raised therein is that suit claiming interest upon interest is not maintainable. It is contended without prejudice to their rights and contentions, that the first defendant had paid the entire principal amount during the pendency of the suit. As regards the documents executed on 18th February 1985, the defendants contended that they were not in a position to comment on averments made in paragraphs 2 to 4 in the plaint for want of inspection. 4 Similarly, as regards the allegation made in paragraph 6 of the plaint regarding the execution of letter of guarantee dated 01st January 1988, the defendants contended that they were not in a position to comment for want of inspection. The defendants, however, denied the execution of the set of documents allegedly executed by the second defendant on 1st January 1988. The defendants contended that material correspondence has been suppressed by the plaintiff bank. In the plaint it is contended that though a demand was made, the plaintiff bank has not furnished a copy of accounts and other details. Reliance was placed on order dated 26th February 1992 passed by this Court. It is stated that as per the said order, a sum of Rs.60,000/- has been paid by the defendants to the plaintiff during the pendency of the suit. Lastly, it was contended that the suit is liable to be dismissed and defendants are entitled to a refund of a sum of Rs.60,000/- which was paid during the pendency of the suit. 6. Issues were framed on 27th August 2007 which read thus: (1) Whether the plaintiffs prove that at the request of the defendants the plaintiffs 5 have sanctioned and granted an open cash credit limit of Rs.60,000/- with other type of Credit Limit? (2) Whether the plaintiffs prove that the defendant no.2 executed Demand Promissory Note dated 18.02.1985 for Rs.60,000/- duly signed by her? (3) Whether the plaintiffs prove that the defendant no.2 has executed an agreement dated 18.02.1985 on behalf of the defendant no.1? (4) Whether plaintiffs prove that defendant no.3 has executed guarantee letter dated 18.02.1985 and 01.01.1988, in favour of the plaintiffs? (5) Whether the plaintiffs prove that the defendants are entitled to pay claim amount of the plaintiff as prayed? (6) Whether defendant no.1 prove that the defendant no.1 has paid entire principal 6 amount and there is nothing due and payable by the defendants? (7) Whether defendants prove that the plaintiffs are guilty of suppression of material facts? (8) Whether defendants prove that they are not entitled to pay interest as demanded by the plaintiffs? (9) Whether the defendants prove that in view of their having paid the entire principal sum of Rs.60,000/- in instalment as per order dated 26.02.1992 passed by Hon’ble Mr.Justice S.N.Varia their only liability is for payment of interest till last instalment? (10) What order and costs? 7. The plaintiff bank filed affidavit (Exhibit P) in lieu of examination in chief of one Mr.Prakash G. Mangle, the manager of the plaintiffs and produced relevant documents. The said witness was cross-examined 7 by the advocate for defendants. The defendants have not adduced any evidence. 8. It must be stated here that in Notice of Motion No.469 of 1990 taken out by the plaintiff bank, an order was passed on 26th February 1992 by which notice of motion was made absolute in terms of prayer clause (a) thereof. This Court directed the defendants to pay the plaintiffs a sum of Rs.3,000/- per month from March 1992 onwards. The defendants were directed to pay the monthly amounts on or before the last date of each calendar month. The order provided that in the event of the defendants committed any two defaults, the notice of motion shall stand allowed in terms of prayer clause (b) except bracketed portion. This Court directed that the amounts paid shall be credited to the defendants’ account. 9. The learned counsel appearing for the plaintiffs has taken me through the pleadings and notes of evidence. He submitted that all the documents on which plaintiffs bank is relying upon have been duly proved in evidence including the certified extract of account. He pointed out from the extract of account of the defendants at Exhibit P-2 that the amounts paid by the 8 defendants during the pendency of the suit have been credited to the account of the defendants. He pointed out that the defendants have not stepped into witness box to dispute the case of the plaintiffs and therefore, the plaintiffs are entitled to the decree as prayed. 10. The learned counsel appearing for the defendants pointed out that the documents allegedly executed by the defendants on 18th February 1985 and 01st January 1988 were not admitted by the defendants and only an office copy of the notice dated 26th September 1988 and statement of account (Exhibit P-2) were admitted by the defendants. Inviting my attention to the affidavit in lieu of examination in chief of the witness examined by the plaintiffs as well as examination in chief recorded before this Court, he pointed out that the witness had no personal knowledge as regards the signatures of the second and third defendants and all that the witness stated is that the signatures appearing on the documents of the second and third defendants are as per the specimen signatures available with the bank. He, therefore, submitted that the execution of the said documents is not at all proved by the plaintiffs. He submitted that even the document which is marked as Exhibit P-2 will not help the plaintiffs as the consent 9 granted by the defendants on the list of documents was for limited purposes of exhibiting the statement of account and contents will have to be proved by the bank. He pointed out that the defendants did not admit the signatures on the account opening form, the signature specimen form and the letter of proprietorship which were produced on 07th February 2008 and only the statement of account (Exhibit P-4) was admitted by the defendants for the purpose of exhibiting the same. He submitted that specimen signatures of the defendants in the said documents have not been proved. He submitted that even the contents of the statement of account at Exhibit P-4 have not been proved. He submitted that the plaintiff bank has not proved that the defendants were liable to pay any amount. He pointed out that infact a sum of Rs.60,000/- has been paid by the defendants to the plaintiff during the pendency of the suit and receipt of the said amount is admitted by the plaintiffs. He invited my attention to the affidavit in lieu of examination in chief of the said witness of the plaintiff which is affirmed on 12th December 2007. 11. I have given careful consideration to the submissions made by the learned counsel appearing for the parties. It will be necessary to refer to the 10 pleadings. In paragraph 2 of the plaint the plaintiff bank has set out that the plaintiff sanctioned open cash credit facility with the limit of Rs.60,000/- to the first and second defendants on request made by the first and second defendants. In paragraphs 2 and 3, reliance has been placed on various documents such as letter of request dated 18th February 1985, the demand promissory note dated 18th February 1985 and the agreement of the same date executed by the second defendant on behalf of the 1st defendant. In paragraph 4, the plaintiff bank has relied upon the letter of guarantee executed by the third defendant on 18th February 1985 alongwith one Mr.P.R.Joshi. The averments in paragraphs 2 to 4 have been dealt with by the defendants in paragraph 6 of the written statement which reads thus: "6. With reference to paras 2 to 4 of the plaint, the defendants say that they are not in a position to comment about the same for want of inspection. Defendants carve liberty to reserve their right to file further written statement if and when the inspection is given." 12. Thus, there is no specific denial in the written 11 statement of the sanction and grant of open cash credit facility of Rs.60,000/- and the execution of various documents by second and third defendants on 18th February 1985. In paragraphs 5 and 6 of the plaint, the plaintiffs Bank relied upon a fresh set of documents executed by the second and third defendants on 1st January 1988. In paragraph 7 of the written statement, there is a denial of execution of documents referred to in paragraph 5 of the plaint allegedly executed by the second defendant. As far as paragraph 6 of the plaint which relates to the execution of letter of guarantee dated 01st January 1988, the defendants have stated that they are not in a position to comment about the said document for want of inspection. In the subsequent part of the written statement it is stated that sum of Rs.60,000/- has been paid by the defendants to the plaintiffs during the pendency of the suit. Thus, there is no specific denial in the written statement of the execution of various documents dated 18th February 1985 by the second defendant on behalf of the 1st defendant and the execution of guarantee of the same date by the third defendant. 13. The true copies of the application dated 18th February 1985, the promissory note date 18th February 12 1985 and the agreement dated 18th February 1985 executed by the second defendant on behalf of the first defendant were annexed to the plaint. There is no specific denial of the execution of the said documents by the defendants. Similarly, a true copy of the letter of guarantee dated 18th February 1985 executed by the third defendant was annexed to the plaint and there is no specific denial of the execution of the said document. Therefore, the execution of the said documents referred to paragraphs 2 to 4 of the plaint shall be deemed to have been admitted by the defendants on account of their failure on deny the execution thereof in the written statement. None of the defendants have entered the witness box to deny the execution of the said documents. A fact which is admitted need not be proved. The originals of the documents referred in paragraph nos.2 to 4 were produced by the plaintiffs Bank. The defendants have not stepped into witness box for stating that the documents which are produced in original are not the originals of the documents annexed to the plaint and marked as ‘A’, ‘A-1’, ‘B’ and ‘C’ which are referred to paragraphs 2 to 4 of the plaint. In the circumstances, the said documents will have to be taken as proved. Therefore, the fact that open cash credit limit of Rs.60,000/- was granted by the plaintiffs to 13 the first defendant has been established. 14. It will be also necessary to refer to the compilation of the original documents dated 27th August 2007 produced by the plaintiffs Bank. The advocate for the defendants admitted the certified extract of the account of the first defendant which is marked as Exhibit ‘P-2’. The said statement of account has been duly certified in accordance with the Bankers’ Books of Evidence Act, 1891. The said extract of account shows that a sum of Rs.1,90,058/- was payable by the first and the second defendants on the date of filing of the suit. Moreover, alongwith the compilation dated 7th February 2008, another statement of account was produced by the plaintiffs. The said statement of account was specifically admitted by the advocate for the defendants which has been marked as Exhibit ‘P-4’. The said statement of account also confirms that a sum of Rs.1,90,058.34 was due and payable by the first and the second defendants on the date of the institution of the suit. 15. The account opening form, the signature specimen card and the letter at proprietorship signed by the second defendant on behalf of the first defendant have 14 been duly proved and have been marked as Exhibits. The second defendant has not stepped into witness box to dispute her signatures on the said documents at Exhibit ‘P-5’, Exhibit ‘P-6’ and Exhibit ‘P-7’. The guarantee agreement dated 18th February 1985 singed by the third defendant and one Shri P.R. Joshi has been duly proved in the evidence and has been marked as Exhibit ‘P-9’. The letter of guarantee dated 1st January 1988 has been marked as article ‘X-1’. The signatures of the third defendant appearing on the document at Exhibit ‘P-9’ and the document which has been marked as ‘X-1’ appear to be identical. As stated earlier, even the third defendant has not stepped into witness box to deny the execution of the said documents. Therefore, the document marked as ‘X-1’ will have to be treated as duly proved. The agreement of loan executed on 1st January 1988 executed by the second defendant on behalf of the first defendant has been admitted in evidence and marked as Exhibit ‘P-9’. The contents of the documents which are admitted in evidence are supported by the extracts of the accounts of the first defendant which are at Exhibit ‘P-2’ and Exhibit ‘P-4’. Thus, issue nos.1 to 4 will have to be answered in favour of the plaintiffs. 16. Now turning to issue no.5, the documents at 15 Exhibit ‘P-2’ and Exhibit ‘P-4’ which are the extracts of the account of the first defendant certified in accordance with the Bankers’ Books of Evidence Act, 1891 prove that the balance amount payable by the first and the second defendants on the date of the institution of the suit was Rs.1,90,058.34. Both the statements of accounts reflect that certain amounts were paid by the first and the second defendants to the plaintiff-Bank during the pendency of the suit. The said amounts paid from 3rd April 1992 to 30th December 1993 are reflected in the said statements of accounts. In view of the statements of account at Exhibit ‘P-2’ and Exhibit ‘P-4’, issue no.5 will have to be answered in favour of the plaintiffs. 17. Issue nos. 6 and 9 will have to be considered together and the effect of payment of amounts by the defendants during the pendency of the suit will have to be considered. As stated earlier, the balance amount payable by the first and the second defendants on the date of institution of suit was Rs.1,90,058/- Therefore, even assuming that the defendants paid a sum of Rs.60,000/- during the pendency of the suit that will not wipe out the liability of the defendants. However, the amounts paid by the defendants during the pendency 16 of the suit will have to be certainly accounted for by the plaintiffs Bank. 18. So far as issue no.7 is concerned, the defendants could not establish suppression of any facts by the plaintiffs as the defendants have not adduced any evidence. Therefore, the said issue will have to be answered against the defendants. 19. The remaining issues will have to be considered together. The contractual rate of interest was 4 % above the per Reserve Bank of India rate with minimum of 14% per annum. Upto the the date of institution of the suit, the plaintiff Bank is naturally entitled to contractual rate of interest. In view of section 34 of the Code of Civil Procedure, 1908, the interest from the date of the institution of the suit will have to be determined by the Court. While disposing of the notice of motion taken out by the plaintiffs by order dated 26th February 1992, this Court directed the defendants to pay a sum of Rs.3,000/- per month. Accordingly, certain payments which are reflected from the statement of accounts at Exhibit P-2 and P-4 have been made by the defendant from time to time, i.e. from 3rd April 1992 to 30th December 1993. Considering the aforesaid 17 payment of amounts by the defendants, the rate of interest will have to be fixed. Considering the rates of interest prevailing at the time of institution of the suit and considering the fact that the suit has remained pending in this Court since 1989, rate of interest is fixed 10% per annum. 20. A contention was sought to be raised that the plaintiffs were permitted to sell the hypothecated goods under the order dated 26th February 1992. However, there is nothing placed on record to show that the plaintiffs have recovered any amounts by way of sale. No such suggestion was given to the witness examined by the plaintiffs. 21. Now turning to the statement of accounts at Exhibit ‘P-2’, after date of institution of suit, entries have been made in the accounts of amount of Rs.20/-, Rs.2,511.90, Rs.8,000/-, Rs.249/- and Rs.7.50 towards the costs of NJSP, DICGC, suit expenses, suit expenses and xerox copies respectively. As a separate order is being passed for awarding the costs of the suit, the plaintiffs Bank will not be entitled to recover the aforesaid amounts of Rs.2511.90, Rs.8,000/-, Rs.249 and Rs.7.50 respectively. As stated earlier, the 18 plaintiffs Bank will be entitled to a decree in the sum of Rs.1,90,058.34 together with the interest at the rate of 10% per annum the said amount. The amounts deposited by the defendants from time to time during the pendency of the suit will have to be adjusted towards the interest at the rate of 10% per annum on the respective dates on which the said amounts were deposited and after appropriating the amounts towards the interest, the balance, if any, shall be adjusted against the principal. The plaintiffs Bank will be entitled to recover costs of the suit from the defendants. 22. Hence, I pass the following order :- (1) The defendants are ordered and decreed to jointly and severally pay an amount of Rs.1,90,038.34 together with simple interest thereon at the rate of 10% per annum from the date of institution of the suit till the realisation of the amount. (2) The amounts paid by the defendants to the plaintiffs Bank during the pendency of the suit which are reflected in Exhibit ‘P-2’ shall be adjusted on the respective dates of deposit 19 firstly against the simple interest payable at the rate of 10% per annum on the principal amount of Rs.1,90,038.34 from the date of institution of the suit and the balance, if any, shall be adjusted towards the principal amount. The plaintiff-Bank shall prepare a fresh statement of account showing the decretal amount payable by the defendants in terms of this Judgment and a true copy thereof shall be supplied to the defendants as well as their advocates within a period of four months from today. (3) The plaintiffs will be entitled to recover proportionate costs of the suit from the defendants. (A.S.Oka,J)