JUDGMENT
Mukundakam Sharma, J.
1. This is a suit filed by the plaintiff
seeking for a decree for recovery of an amount of
Rs. 2,04,303.59 with interest and costs.
2. The plaintiff is a schedule bank
constituted under the Banking Companies
(Acquisition and Transfer of Undertakings) Act.
The defendant No. 1 is a Private Limited Company
registered under the Companies Act and the
defendants 2 & 3 at the relevant time were the
Directors of the first defendant along with
defendant No. 4. In or about April, 1976,
defendants 2 to 4, on behalf of defendant No. 1,
approached the plaintiff bank for grant of
financial facilities. On 5.5.1976, after the
defendants had signed and executed a Demand
Promissory Note for Rs. One lakh, an agreement of
hypothecation of goods and other relevant documents
were executed between the plaintiff bank and the
defendants.
The plaintiff bank granted to the
defendants Packing Credit Limit of Rs. One lakh.
Subsequently, the defendants approached the
plaintiff bank for extension and/or renewal of the
same including an increase of the facilities from
Rs. One lakh to Rs. Two lakhs and upon defendants’
executing the Demand Promissory Note and other
relevant documents like Letter of Continuing
Security and Hypothecation of Goods, a Deed of
Guarantee, guaranteeing due re-payment of the
facilities, the plaintiff bank increased the
facilities to Rs. Two lakhs some time in July, 1977.
The said increased facilities were duly guaranteed
by the defendants 2 to 4., who undertook to clear
the same in case of any default by defendant No. 1.
However, although the said facilities were utilised
by the defendants, the amounts taken on loan were
not re-paid and on 6.10.1978, defendant No. 2
addressed a letter to the plaintiff bank informing
the plaintiff that he was withdrawing his
guarantee. The said defendant was informed by the
plaintiff that eh could not withdraw the guarantee
at his own and that he could withdraw the same on
payment of the entire dues of the defendant No. 1.
By letter dt. 14.12.1979, the plaintiff called upon
the defendants to clear the account, failing which
legal action would be taken but since the aforesaid
amount was not re-paid, the aforesaid suit was
filed seeking for the aforesaid relies.
3. The aforesaid suit was contested by the
defendants, who filed their written statement and
on the basis of the pleadings of the parties,
following issues were framed in the suit:-
1. What is the amount due under the hypothecation
of goods account which defendant No. 1 opened
with the plaintiff bank?
2. Was the guarantee extended by defendants 2 to 4
for payment of the amount due under the said
account subsisting on the date of the
institution on the suit?
3. Is the suit barred by time?
4. Has this Court no jurisdiction to try this suit?
5. Relief.
4. During, the pendency of the suit, defendant No. 2
died and his legal representatives were brought on
record. In view of addition of the legal representative
of decreased defendant No. 2, an additional issue was also
framed in the suit by an order dt. 27.10.88 to the
following effect:-
“Whether the L.Rs. of defendant No. 2 are not
personally liable of the amount claimed in the
suit”?
5. The suit proceeded ex parte as against defendant
No. 4 and defendant No. 1 whereas legal representatives of
defendant No. 2 and the defendant No. 3 were represented by
their counsel. On behalf of the plaintiff two witnesses
were examined whereas defendant No. 3 examined himself.
No other witness was examined by the parties. After oral
and documentary evidence were received, the suit was
listed for final hearing and in that process I heard the
learned counsel for the plaintiff as also the counsel
appearing for the substituted defendant No. 2 and
defendant No. 3.
ISSUE NO.1.
In their deposition, the witnesses produced on
behalf of the plaintiff have stated that in or about
April, 1976 the defendant No. 1 granted packing credit
facility on execution of the documents like Demand
Promissory Note and Letter of Continuing Security both
dt. 5.5.1976 Ex. PW-1/2 and Ex.PW-1/3. It is stated by
them that the said facility was duly availed of. The
letter dt. 2.4.1977, by which defendant No. 1 requested for
enhancement of the credit facility is also exhibited as
Ex. PW-1/4. The aforesaid facility of enhancement of
credit facility to Rs. Two lakhs was also granted in
favor of defendant No. 1 upon defendant No. 2 executing
Demand Promissory Note, Ex.PW-1/6, Agreement of
Hypothecation of Goods, Ex.PW-1/7 both dt. 29.7.1977. The
Demand Promissory Note Ex.PW-1/6 was also signed by
defendants 2 & 3. It is stated by the aforesaid
witnesses produced on behalf of the plaintiff that
personal guarantees were also executed by defendants 2 &
3 but the same have been misplaced and, therefore, the
same could not be exhibited in the suit. However, some
contemporaneous documents have been placed on record by
the plaintiff’s witnesses marked as Ex.P-8, Ex. PW-2/1 and
Ex.PW-2/2. Ex.P-8 is a letter dt. 6.10.1978 written by
the defendant No. 2 wherein the said defendant had stated
that he had asked for credit facilities for production
and export of leather garments and leather articles from
the leather unit of defendant No. 1 and that he signed the
documents as guarantor for the said credit facilities
up to Rs. One lakh. He also stated that he was
co-guarantor with Dr. J.Joshi. By the aforesaid letter
the said defendant No. 2 sought to withdraw his guarantee
and requested the plaintiff bank to treat that there is
only one guarantor, namely, Dr. J.Joshi for the facilities
extended to their business. By letter dt. 25.11.1978, the
plaintiff bank informed the defendant No. 2 that the
limits were sanctioned to the defendant No. 1 in addition
to other securities on the personal guarantee of
defendant NO. 3 and defendant No. 2. He was also informed
that the debit balance in the aforesaid account as of
date i.e. on 25.11.1978 was Rs. 1,49,772.34 and he was
informed that if he was interested in withdrawing the
said guarantee, he is to re-pay the aforesaid amount
immediately to liquidate the accounts. Subsequently,
another letter of similar nature was issued by the
plaintiff bank to the defendant No. 2, which is
dt. 19.12.1978 exhibited as Ex.PW-2/2. the personal
guarantee executed by defendant NO. 4 is proved as
Ex.PW-1/8. It was stated by the aforesaid two witnesses
examined on behalf of the plaintiff that the aforesaid
facilities were availed and continued to be enjoyed by
the defendants and the outstandings in the said account
were demanded by the plaintiff bank vide two letters i.e.
letter dt. 14.12.1979, Ex.P-2/9 and Ex.PW-2/10. The
plaintiff bank also proved the statement of account as
Ex.PW-2/11, which indicates that the outstanding amount
was Rs. 2,01,031.99 as on 25.6.1980. In addition to the
said amount, interest was also claimed on the outstanding
amount from 26.6.1980 to 28.7.1980 and the suit was filed
claiming payment of an amount of Rs. 2,04,303.59.
6. The aforesaid documents placed on record through
the evidence of PW-1 and PW-2 clearly establish that a
sum of Rs. 2,04,303.59 was due and payable under the
credit facilities and, therefore, the Issue No. 1 is
answered in favor of the plaintiff and against the
defendants.
ISSUE NO. 2.
7. Now, I proceed to decide Issue No. 2 as framed in
the present suit. Guarantee of defendant No. 4 is
dt. 29.7.1977, which is exhibited as Ex.PW-1/8 and is
proved. Although it is stated that both defendants 2 & 3
also executed their personal guarantees on the same terms
and conditions, the same, however, were not traceable
and, therefore, could not be proved in the suit.
However, the document exhibited as Ex.P-8, proves and
establishes that personal guarantee was executed. The
said letter Ex.P-8, is dated 6.10.1978 by which the
defendant No. 2 intended to withdraw his personal
guarantee. the two letters written by the bank on
25.11.1978 and 19.12.1978 also prove that the bank asked
the defendant No. 1 to deposit a sum of Rs. 1,49,772.34 as
was due then, as a condition to withdraw the guarantee.
The said evidence and the aforesaid documents were not
challenged in the cross-examination and therefore, there
is no denial to the said facts. The aforesaid documents
are, therefore, admitted documents and the same establish
that defendant 2 to 4 gave personal guarantee for due
payment of the loan amount. The guarantee was executed
on 29.4.77 and the suit was filed on 28.7.1980 and thus
the guarantees of defendants 2 to 4 were subsisting on
the date of filing of the suit.
ISSUE NO. 3.
8. With the decision on the aforesaid two issues, I
now proceed to decide as to whether the suit is barred by
time. The credit facility was availed of and documents
were executed on 5.7.1976 and the credit facility was
extended and documents were executed on 29.7.1977 being
Ex. PW-1/6 to Ex. PW-1/8 and the letters dt.6.8.1977
Ex. PW-2/7 and dt.16.3.1978 Ex.PW-2/8 establish and admit
jural relationship between the parties. There are debit
and credit entries in the accounts by which its nature is
current, open and general upon 25.6.80 and, therefore,
the suit is clearly within time.
ISSUE NO. 4.
9. The defendants also sought to allege that this
court has no jurisdiction to try the suit. Onus to prove
the said issue was on the defendants. No such evidence
could be led by the defendants to prove as to why this
court has no jurisdiction to try the present suit. On
the other hand, the plaintiff bank has proved that the
facilities were granted and were repayable at Delhi and,
therefore, the Delhi courts have the jurisdiction to try
and decide the present suit.
ADDITIONAL ISSUE
10. So far the additional issue, which was framed on
27.10.88 to the effect whether the L.Rs of defendant No. 2
are not personally liable of the amount claimed in the
suit, is concerned, onus to prove the said issue was on
the legal representatives of the said defendant. The
said legal representatives have not led any evidence and,
therefore, they have failed to establish the aforesaid
issue so framed. On the other hand, the bank has proved
Ex.P8, which is dated 6.10.1978 and which proves the
personal liability of the deceased defendant NO. 2 so far
the suit amount is concerned. The said document along
with Ex.PW2/1 and Ex.PW2/2 are not challenged by the
legal representatives of the said defendant No. 2 in
cross-examination and, therefore, the said documents
fasten liability not only on the said legal
representatives but also on the defendant No. 3, who also
has not challenged the said part of the evidence.
Accordingly, it is held that the said legal
representatives of defendant No. 2 are also personally
liable for repayment of the amount claimed in the suit by
the plaintiff bank.
11. It was also sought to be contended by the
counsel appearing for defendant No. 3 that defendant No. 3
was only a working Director of the company, on salary and
he did not execute any guarantee in his personal capacity
in favor of the plaintiff bank for any loans advanced to
defendant No. 1. I have considered the said submission of
the counsel for defendant No. 3 also. The said defendant
has stated in his examination-in-chief that he, in his
official capacity, signed several documents on behalf of
defendant No. 1 but he did not sign any guarantee for
re-payment of the loan. A suggestion was given to the
said witness/defendant No. 3, in his cross-examination, by
the counsel appearing for the plaintiff bank, which was
denied by him stating that he had not signed the
guarantee and had not undertaken the obligation for
re-payment of the loan. However, it is already pointed
out from the contents of Ex.P-8, authenticity of which is
not denied by the said defendant No. 3, that the said
defendant No. 3 was also a co-guarantor.
12. In that view of the matter and on the basis of
evidence on record, both oral and documentary, I hold
that the plaintiff has been able to prove its case to the
hilt and that the plaintiff is entitled to a decree for
recovery of the amount, as sought for by the plaintiff.
Apart from defendant No. 1 and defendant No. 4 legal
representatives of deceased defendant No. 2 and the
defendant No. 3 are also personally liable for re-payment
of the aforesaid loan amount and, therefore, a decree is
passed for recovery of an amount of Rs. 2,04,303.59 in
favor of the plaintiff and as against all the defendants
jointly and severally. In addition, the plaintiff shall
also be entitled to payment of interest @ 9% p.a. from
the date of institution of the suit till the date of
realisation along with a cost, which is assessed at
Rs. 5,000/-. Decree be drawn accordingly.