IN THE HIGH COURT OF JUDICATURE AT MADRAS
Dated: 19/06/2002
Coram
The Honourable Mr. Justice P. SHANMUGAM
and
The Honourable Mr. Justice K. SAMPATH
A.S. No.1288 of 1986
Central Bank of India,
Divisional Office, through
its Chief Manager,
Good Shed Street,
Madurai. .. Appellant
vs.
1. M/s. Athi Offset Printers,
120, Chariman P.K.S.A. Arumuga
Nadar Road, Sivakasi, through
one of its Partners
P. Kanagu Reddy.
2. P. Kanakku Reddy
3. S. Mariappan
4. A.E. Nagarajan
5. A.M. Karuppaswami
6. K. Subbiah Nadar
7. K.A. Malayappa Nadar
8. M/s. Siva Presss, through
its Partner M.L. Chauhan,
B-218, Naraiana Industrial Area
Phase-I, New Delhi-110 028.
9. R.D. Jagtiani
10. Basanth Singh
11. Kanniammal
12. E. Muthu Mariappan
13. Minor E. Periasamy
14. Minor E. Ganesan
15. Minor E. Kumar
(Minor respondents 13 to 15
rep. by their guardian
E. Muthu Mariappan
16. Mariammal
17. E. Anna Pushpam
18. Minor E. Duskeswari
19. Minor E. Pappa
(Minor respondents 18 & 19
rep. by their guardian
A.E. Nagarajan) .. Respondents
PRAYER : Appeal against the Judgment and Decree dated passed by the learned
Subordinate Judge, Srivilliputhur dated 29.8.1985 and made in O.S. No.101 of
1982.
!For Appellants : Mr. T.R. Mani, Senior Counsel
for Mr. T.M. Hariharan.
^For Respondents : Mr. S.M. Hameed Mohideen
(For R-1 to R-5)
Mr. V. Venkataseshan
(For RR-6, 7, 11, 12, 13,
16, 17, 18 and 19)
:J U D G M E N T
P. SHANMUGAM, J.
Plaintiff is the appellant. The appeal is against the dismissal of
the suit filed for a declaration that they are entitled for payment of
Rs.6,64,055.14 with interest at 11.85% per annum and for a preliminary
mortgage decree against defendants 2 to 4, 6 and 12 to 20, and in case the
sale proceeds are not sufficient to satisfy the amount due, for a personal
decree against all the defendants. The learned Sub Judge dismissed the suit
against all the defendants, but decreed the suit as against the ninth
defendant. The appeal is against this judgment and decree.
2. The brief facts of the case are stated hereunder. The parties are
described as per their rank before the Subcourt.
3. The first defendant is a newly registered partnership firm. They
are freshers and wanted to start an industry in printing. Defendants 1 to 5,
through a common broker, were introduced to the ninth defendant who assured
the third defendant that he was in a position to supply printing machines with
all equipments and that he had a title to a printing machine. An agreement
dated 29.3.1980 was entered into on behalf of the firm with the ninth
defendant for the sale of a printing machine which was housed in the premises
of one Rahamath Press at Hyderabad. Defendants 1 to 5 paid an advance of
Rs.1,00,000/- towards the settled price of Rs.8,25,000/- on 29.3.1980.
Thereafter, they sought for financial assistance from the plaintiff bank. In
the meanwhile, the machine is said to have been shifted to the ninth
defendant’s premises at New Delhi and therefore, the regional office of the
plaintiff bank at New Delhi had been requested to get the machine inspected by
an approved Valuer, and the tenth defendant, an approved Valuer and a
Chartered Engineer, after inspection of the machinery, submitted his report on
23.7.1980. Thereafter, the regional office of the plaintiff bank at Madurai
sanctioned an amount to an extent of Rs.5 ,48,000/- and defendants 1 to 5
executed an agreement with the bank on 24.10.1980 and on the same day,
defendants 2 to 5 also executed a loan-cum-hypothecation agreement,
hypothecating the machine. Defendants 2 and 6 to 8 had deposited title deeds
relating to the properties as security for the loan. As the original price of
the machine was Rs.8,25,000/-, the defendants had paid a sum of Rs.1,00,000/-
as advance on 29.3.1980 and another sum of Rs.50,000/- on 11.9.1980 and the
balance due was Rs.6,75,000/-. Defendants 1 to 5 were asked by the plaintiff
bank’s branch at Sivakasi to deposit with their branch a further sum of
Rs.1,27,000/- over and above the sanctioned loan of Rs.5,4 8,000/- to make up
the amount for the sale consideration. Accordingly, defendants 1 to 5 had to
deposit the said amount of Rs.1,27,000/-. At the instance of the ninth
defendant, the draft was sent to the New Delhi branch of the plaintiff bank
with instructions to hand over the draft to the ninth defendant after
satisfying the title of the ninth defendant to the machinery and only after
dismantling and loading the machinery in the truck. On further instructions
from the regional office of the plaintiff bank at Madras, the New Delhi branch
was directed to allow the ninth defendant to encash the draft subject to the
party giving suitable undertaking drafted by a lawyer. Thereafter, a
tripartite agreement dated 10.11.1980 between the ninth defendant represented
by its partner as Seller, the first defendant represented by the third
defendant as Buyer and the regional office of the plaintiff bank as the Bank.
Pursuant to the said undertaking, the demand draft was handed over to the
ninth defendant by the bank and he was allowed to encash the same.
Thereafter, the ninth defendant had issued an invoice dated 16.11.1980
claiming to have despatched the machine through M/s. Omkara Transport, New
Delhi to Sivakasi. But as a matter of fact, no such transport company is in
existence or the machine was transported by the said lorry.
4. According to defendants 1 to 5, they had informed the plaintiff
that inspite of the encashment of the draft and receipt, the machine was not
loaded and transported to defendants 1 to 5 and they requested action to be
taken against the ninth defendant. According to the plaintiff, the defendants
have taken delivery as per the records furnished by the ninth defendant and
therefore, the defendants are liable for the amount. Both the parties pleaded
collusion with the ninth defendant against each other. However, it is
admitted now in the plaint that the machine had not been despatched in any
truck from New Delhi. According to the plaintiff, they had parted with the
demand draft and allowed the encashment of the same by the ninth defendant
before the machine in question was actually dismantled and loaded in the truck
for despatch and the agreement dated 10.11.1980 had been entered into under
the bonafide plea that the ninth and the first defendant have had come to a
bonafide agreement with regard to the condition of the machine, it delivery
and despatch etc. Whereas, it is the specific case of defendants 1 to 5 that
they were new to the business and that they had very little education and
experience having no knowledge of English or Hindi at New Delhi and it is the
bank officials who have manipulated the records and allowed the encashment of
the demand draft by the ninth defendant in collusion with him in order to
defraud defendants 1 to 5.
5. The suit has been filed for a declaration that the plaintiff is
entitled for payment of Rs.6,64,055.14 with interest and for a preliminary
mortgage decree and for a personal decree.
6. The ninth as well as the eleventh defendant remained ex parte.
The learned Sub Judge, after an elaborate trial, found as follows :
(a) that the tripartite agreement dated 10.11.1980 would supersede the
loan and guarantee agreements dated 24.10.1980 ;
(b) that the plaintiff had agreed to secure the machine and unless the
same was delivered to defendants 1 to 5, no claim will lie against them ; and
(c) that the bank officials have acted contrary to the instructions of
their Sivakasi branch and acted in support of the ninth defendant, resulting
in the loss of the machine.
On these findings, the trial court decreed the suit only as against the ninth
defendant and dismissed the suit as against the other defendants. The appeal
is against this judgment and decree.
7. The plaintiff rested the suit on the basis of an agreement dated
24.10.1980 containing the terms of the term loan. The hypothecation letter of
the first defendant and the mortgage by deposit of title deeds by the
guarantors for securing the due repayment of the amount of a sum of
Rs.5,48,000/- on their failure to repay the loan. The plaintiff proceeded to
state that it is defendants 1 to 5, who in collusion with the ninth defendant,
induced the plaintiff to part with the demand draft for Rs.6,75,000/- to the
ninth defendant for his encashment, preceded by a tripartite agreement dated
10.11.1980 and therefore, the defendants are solely liable to repay the
amount. Whereas, the case of the defendants is that it is not a simple loan
transaction and there is no normal relationship of lender and borrower, and as
per the conditions of the sanctioning of the loan, the plaintiff bank has to
deliver the machinery for the price for which the loan has been sanctioned.
They contend that they are the victims of great fraud, cheating and breach of
trust and that the bank officials have colluded with the ninth defendant and
released the draft and permitted the encashment of the same even before
verifying the title of the ninth defendant to the machinery and the delivery
of the same to the defendants. According to the defendants, the plaintiff has
caused loss to the defendants to an extent of Rs.2,75,000/- which was paid by
the defendants by way of advance for the purchase of the machinery as well as
the further balance deposited with the bank towards the sale consideration.
The defendants also plead that they being new to the business, in contrast
with the experienced staff of the bank, had been subjected to harassment,
coercion and were forced to sign various documents in order to help the ninth
defendant. According to them, the bank acted against the interests of an
ignorant customer.
8. We have heard Mr. T.R. Mani, learned senior counsel appearing on
behalf of the appellant in extenso as well as Mr. S.M. Hameed Mohideen and
Mr. V. Venkataseshan, counsel for the respondents. There was no
representation on behalf of the ninth defendant.
9. Pursuant to an application dated 23.4.1980 (Ex.A.1) for a term
loan to the extent of Rs.6,00,000/-, the plaintiff bank sanctioned a loan.
The bank had obtained the usual agreement, letter of hypothecation and
guarantee on the deposit of title deeds, creating mortgage on 24.10.1980. As
per the terms of the agreement, the machinery was to be treated as the
property of the bank and the same shall be the subject matter of mortgage to
the bank. The sanctioning order containing the conditions of the sanction was
not produced by the plaintiff inspite of a specific order by the court to do
so. The case of the counsel for the defendants is that the sanctioning of the
loan is for the purchase of the machinery and subject to the physical
verification and title on the part of the ninth defendant. As rightly pointed
out, the amount sanctioned was only Rs.5,48,000/-, but the same was not handed
over to the defendants. The said amount was debited to the account of the
defendants and thereafter, the defendants were directed to make a further
deposit of Rs.1,27,000/- to make up the sum of Rs.6,75,000/- which represents
the balance amount payable towards the value of the machinery which is
Rs.8,25,000/-, after giving credit to Rs.1,50,000/- which was already paid by
the defendants. Without any intimation from the defendants, the bank had
insisted upon the defendants to make a deposit of Rs.1,27,000/- above the
sanctioned loan of Rs.5,48,000/- to make up the amount required for the bank
draft. Though the defendants did not ask for taking of a bank draft of
sending it to the ninth defendant, as per the instructions for the divisional
office at Madras, a draft was taken and sent to the regional office at New
Delhi directly, as evidenced by Ex.A.68. The said communication specifically
directs the regional office, New Delhi to deliver the draft to the supplier
only after satisfying themselves about the clear title of the machinery and
after the machinery is dismantled and loaded in the truck. They have also
directed to obtain receipt of the draft and arrange to advise immediately
after the machinery is taken delivery by the party. Contrary to this specific
direction, a subsequent decision was taken and a direction was issued as per
Ex.A.142 dated 1.11.1980 to the New Delhi office stating that the supplier
wants the draft to be delivered to him before the machinery is dismantled to
avoid the alleged delay and the bank was directed to contact the supplier and
find out a via media to ensure that the machinery is dismantled and
despatched, and in case the supplier insists on the supply of the draft in
advance, to deliver the draft after taking a written undertaking from the
supplier that the machinery will be dismantled and loaded in the truck in good
condition within two days from the receipt of the draft and that the supplier
will hold the draft in the mean time and encash it only after loading the
machinery.
10. In the light of these admitted facts, the crucial question that
arises for consideration is whether the action of the plaintiff in sending the
draft directly in the name of the ninth defendant and delivering the draft
before delivery of the machinery and permitting its encashment before
obtaining delivery of the machinery is correct or not and whether defendants 1
to 5 and 6 to 8 are liable for the suit claim.
11. The argument of the learned senior counsel for the appellant is
that all these transactions had taken place only at the instance of defendants
1 to 5 and with their undertaking and in pursuance to a tripartite agreement
dated 10.11.1980. The case of defendants 1 to 5 is that signatures were
obtained from them by the bank people at New Delhi and the same had been
utilised to show as though they have taken delivery of the machinery. But,
the fact remains, which is now admitted, that the machinery was not delivered
on 16.11.1980. We shall now proceed to consider these documents and as to
what extent they will bind the defendants.
12. Ex.A.68 dated 24.10.1980, a communication of the Branch Manager
of the plaintiff bank, Sivakasi to their Regional Manager, New Delhi as well
as the communication of the Regional Office, Chennai to their office at New
Delhi, Ex.A.142 dated 1.11.1980 is very clear to the effect that the draft
shall be handed over only after the machinery is dismantled and put on truck.
The communication dated 1.11.1980 which waters down this initial condition is
also to the effect that even after handing over of the draft, before
dismantling and despatching the machinery, the draft shall be held up and
should not be allowed to be encashed before loading the machinery in the
truck. After this, by a communication dated 5.11.1980, Ex.A.99, the Madras
office further removes the condition on the encashment of the draft and
permits the ninth defendant to encash the draft subject to his giving a
suitable undertaking properly drafted by a lawyer, confirming that the
machinery will be dismantled and loaded in the truck in good working condition
within a reasonable time after encashment of the draft, say within three days,
and on his failure, he will refund the draft amount unconditionally to the
bank. After this concession by the bank, an agreement dated 10.11.1980 was
entered into between the seller, the buyer and the bank at New Delhi. As per
this agreement, the seller shall be entitled to encash the draft subject to
delivery. In other words, on this undertaking, the seller was permitted to
get the draft and encash the same. The agreement says that in case of
default, both the seller and the buyer shall be jointly and severally liable
for all the damages and loss. The ninth defendant, after encashing the draft,
issues a delivery receipt Ex.A.107 dated 16.11.1980 and a bill Ex. A.108
dated 16.11.1980. But as a matter of fact, no such delivery had been
effected.
13. P.W.2, an officer of the Central Bank Regional Office, New Delhi
during the relevant time, has admitted that they have a list of companies for
transporting the goods and he could not say whether Omkara Transport Company
is in existence. As a party to the tripartite agreement, the plaintiff bank
also has the responsibility for getting delivery of the machinery. They could
not have allowed even for argument sake the undertaking of defendants 1 to 5
as a proof for taking delivery of the machinery. In any event, by that time,
the demand draft had been encashed. The agreement with the ninth defendant
for the purchase of the machinery Ex.A.2 is nothing but a receipt of advance
of Rs.1,00,000/- for the purchase of the printing machine. The receipt is
dated 29.3.1980. Only on the basis of this receipt, the parties proceeded
that the ninth defendant is the owner, whereas it could be seen from Ex.A.5,
report that the ninth defendant purchased this machinery subsequently, i.e.
on 16.6.1980.
14. Another important factor is that on behalf of defendants 1 to 5,
two of the partners of the firm Mr. S. Mariappan and Mr. Kanaku Reddy were
advised to proceed to New Delhi and contact the regional office to liaison the
matter. The letter Ex.A.68 dated 24.10.1980 itself refers to this deputation.
Therefore, it is clear that these two partners were in New Delhi with a copy
of the letter containing their specimen signature to get the machinery.
Contrary to their earlier understanding, the ninth defendant started insisting
that the draft should be handed over to him and that he must be permitted to
encash the same. P.W.4, who is an officer working in the Credit Department of
the bank, has stated that they have received a telex message dated 3.1 1.1980
which is Ex.A.102, wherein it is stated that the supplier insists on the
delivery of the draft for which the regional office sends a reply Ex.A.146.
He further says in his chief-examination that Mariappan and Raman came to
their office and informed him that the supplier is saying that he will
delivery the machinery only when the Delhi office pays him the money and
sought for instructions. Thereafter, he put up a note before the Assistant
General Manager. In the cross-examination, he states that Mariappan came to
their office three times on 25.10.1980, 3.11.1980 and 5.11.1980 and he
emphasises in his evidence that the dates given by him are correct. According
to him, on 29.10.1980, he went to the A.G.M. and talked to him and
immediately he directed him to come with the file. Mariappan told the A.G.M.
that the seller is insisting on the delivery of the draft. He said so to that
effect on 5.11.1980. Prior to this, on 29.10.1980 also, Mariappan made a
representation to the A.G.M. At that time, he was there in the office as an
officer dealing with the file. Mariappan gave an undertaking at that time,
but he did not produce the same. Therefore, a reading of the evidence of
P.W.4 makes it clear that Mariappan had returned back to Madras on 29.10.1980
in the light of the insistence of delivery of the draft and for further
instructions. Ex.A.147 dated 3.11.1980 also refers to Mariappan calling on
the A.G.M. on 30 .10.1980 and Mariappan contacting the department insisting
the supplier’s demand to encash the draft. The document Ex.A.100 states that
it is their risk and responsibility to deliver the draft for Rs.6,75,000/- to
the ninth defendant. They also undertook that the machinery in question will
be truck loaded upon receipt of the draft and that they will do their best to
hold the draft till the machinery is loaded. It is after this that Ex.A.99
was issued by the Madras Regional Office to the Central Zone, New Delhi
allowing the encashment of the draft subject to the undertaking. Therefore,
Mariappan could not have been physically present on 3.11.1980 and this would
have been created on a date suitable and convenient to the appellant and the
ninth defendant. The description of the machinery as per the delivery receipt
dated 16.11.1980 is different from the one in the report of the Engineer,
Ex.A.5. It is obvious that the delivery receipts and the bills have been
fabricated as though the machinery were delivered and truck loaded.
15. After the failure of the ninth defendant to deliver the
machinery, the defendant, along with Raman, went to Delhi and met P.W.2 and
the ninth defendant. It is stated that the ninth defendant demanded a further
sum of Rs.35,000/- and unable to meet this demand, they returned back to
Sivakasi. On 17.1.1981, the ninth defendant had issued a telegram to the
second defendant, Ex.P.15 directing the defendants to come to Hyderabad on
22.1.1981. Defendants 1 to 3 went to Hyderabad to meet the ninth defendant,
but had to return disappointed, since the ninth defendant did not turn up.
Thereafter, they wrote Ex.A.96 to the Manager, Sivakasi Branch dated
27.1.1981, copies of which were sent to Madras, Madurai and Delhi branches of
the plaintiff bank. It is thereafter, defendants again went to Delhi and met
P.W.2 with Ex.A.1, letter dated 24.2.1981 and tried to meet the ninth
defendant. This time, the ninth defendant is said to have demanded a further
sum of Rs.36,000/- and after returning to Sivakasi, they gave a complaint
Ex.A.73 requesting the appellant to hand over the machinery.
16. The trial court discussed these aspects and found that the
defendants had tried to pay the excess demand of Rs.1,36,000/- by taking two
demand drafts from the Sivakasi branch as evidenced by Ex.B.20 and Ex.B.21.
Ex.A.121, the telegram sent by the appellant refers to the defendants coming
with the additional amount. The said communication was received by the Delhi
branch on 11.3.1981. Besides, Ex.A.131, telegram refers to one Chockalingam
going to Delhi with a demand draft for Rs.1,36,000/- for the purpose of
getting the machinery. Even after this, the ninth defendant appears to have
directed defendants 1 to 5 to change the demand draft to the Hyderabad branch.
Hence, the defendants changed the draft to the Hyderabad branch and requested
the eleventh defendant to come over to Hyderabad. The eleventh defendant, in
turn, issued a telegram Ex.B.16. When the telegram Ex.B.16 was shown to the
ninth defendant, he had sent a written message directing the eleventh
defendant to contact him over telephone. The writings were marked as Ex.B.17,
wherein he says that the ninth defendant’s telephone has been under repair.
Believing the words of the ninth defendant, the second defendant went to
Hyderabad and was disappointed on the failure of the ninth defendant to meet
them and proceeded to give a criminal complaint against the ninth defendant,
Ex.B.10. From the above action on the part of the defendants, both prior to
the taking of the loan and the subsequent failure on the part of the ninth
defendant to deliver the machinery, the trial court found that defendants 1 to
5, who comprised of college freshers and who are new to the business, joining
as partners, intended to start a business by opening a printing press and
invested a sum of Rs.1,50,000/- as advance for the machine ordered by them and
besides payment of Rs.1,25,000/- to make up the total cost of the machinery,
had also taken a draft for another sum of Rs.1,36,000/- to meet the subsequent
demand of the ninth defendant. Thus, it is seen clearly that the machinery,
for which the defendants had paid the advance and an additional amount, was
not delivered to them and they had been tossed from Madras to Delhi and
Sivakasi on so many occasions and this only shows that the defendants had been
cheated and defrauded by the ninth defendant and it could not have been
possible without the assistance of the officials of the plaintiff bank.
17. After going through the evidence and the records, we are clear in
our mind that though the term loan was sanctioned, as per the conditions of
the sanctioning order, the money was not given to defendants 1 to 5. On the
contrary, a draft was made ready to the supplier of the machinery with a
specific condition that the draft should be handed over only after delivery of
the machinery and after the same was loaded on the truck. Inspite of this
specific condition, the same was watered down to allow the ninth defendant to
have the draft, but at the second stage, the Delhi branch was directed to hold
the encashment of the draft. Even the second safeguard was given a go-by by
the regional office, which directed the New Delhi branch to permit the
encashment of the draft even prior to the delivery of the machinery subject to
the filing of a mere undertaking. Thus, the bank has allowed not only the
sanctioned loan amount of Rs.5,48,000/-, but also including the sum of
Rs.1,27,000/- which was deposited by defendants 1 to 5 to make up for the
price money of the machinery, to be carried to the ninth defendant. We are of
the view that the officials of the plaintiff bank acted contrary to their own
conditions and were negligent in permitting the encashment of the draft on the
plea that the defendants had undertaken the responsibility. As an experienced
banker, even if defendants 1 to 5 had undertaken the responsibility, they
should not have permitted the encashment of the draft without delivery of the
machinery. Since the main loan was intended to purchase the machinery, the
bank is not justified in giving away the money without the machinery being
delivered, having taken the responsibility in securing the machinery. They
cannot simply wash off their hands on the mere undertaking of either the ninth
defendant or defendants 1 to 5 themselves. In this case, we are convinced
that defendants 1 to 5 were taken for a ride and all the alleged undertakings
and delivery receipts were fabricated for the purpose of the case, as has been
clearly established from the subsequent events. The plaintiff themselves have
conceded that the ninth defendant had no title to the machinery at the time of
the agreement with defendants 1 to 5 and they further conceded that even the
report given by their Valuer is a fictitious one.
18. As per Ex.A.142, telegram dated 1.11.1980 sent by the Madras
office to the New Delhi branch, they permitted delivery of the draft before
the machinery is dismantled, but they also directed to ensure that the draft
shall not be encashed till the machinery is loaded in the truck. In
consonance with this direction, a letter of undertaking was taken from the
second defendant that the draft may be given on their risk and responsibility
and that they shall try to hold the draft till the machinery is loaded in the
truck. Assuming for the sake of argument that the second defendant was at New
Delhi on 3.11.1980, there was no further representation or correspondence to
enable the Madras office to grant permission to the ninth defendant to encash
the draft. As per Ex.A.99 dated 5.11.1980, the telex message sent, the Madras
office, without reference to any representation whatsoever, suo motu directs
the New Delhi office to allow the ninth defendant to encash the draft subject
to the filing of an undertaking. Further, contrary to the other agreements,
the draft was delivered on 10.11.1980, allowed to be encashed before
13.11.1980 and the delivery receipt is said to have been given only on
16.11.1980. The second defendant disputes the letter dated 3.11.1980 and the
delivery receipt dated 16.11.1980 stating that they were obtained on false
pretence at the instance of the Delhi branch office. There are no records to
show the date of furnishing of the alleged receipt dated 16.11.1980 excepting
Ex.A.132, wherein the ninth defendant says that he had already delivery the
receipts dated 16.11.1980.
19. P.W.2, the Chief Officer of the New Delhi branch of the plaintiff
bank, in his cross-examination, says that the New Delhi office received the
communication of the Sivakasi office dated 24.10.1980 (Ex.A.8) directing
delivery of the draft only after satisfying the title and after the machinery
is dismantled and put on truck and according to him, this letter was
transferred to his section on 3.11.1980. However, as per Ex.A.140 dated
3.1.1980, the New Delhi office gave the telegram to the Madras office seeking
revised instructions in reference to the encashment of the demand draft before
dismantling the machinery. Obviously, P.W.2, the officer, is not speaking the
truth, because the draft had been sent along with the letter dated 24.10.1980
(Ex. A.68) and thereafter, a telegram was issued on 1.11.1980, specifically
in reference to the New Delhi branch, referring to the insistence of the
supplier to get the draft and the draft was directed to be handed over, with
further instructions that the draft shall be withheld from encashment till the
machinery was loaded in the truck.
20. It is admitted by P.W.1 that the report Ex.A.5 is a false one.
It is admitted by both P.W.1 and P.W.2 that the description of the machinery
varies between the valuation report as well as the delivery receipt. By
Ex.A.113 dated 21.2.1981, a telegram issued by the Divisional Office, Madurai
to the New Delhi office, points out that the ninth defendant had not delivered
the machinery and that the instructions dated 24.10.1980 specifically stated
that only after satisfying the title of the machinery and after the machinery
is dismantled and put on truck the draft should have been delivered and that
this appears to have not been complied with. They further directed to ensure
immediately the despatch of the machinery and to take urgent steps to
safeguard the bank’s interest. On 27.1.1981 itself, the second defendant
writes to the offices at Madurai, Madras, New Delhi and Sivakasi about the
non-delivery of the machinery and the evasive reply of the ninth defendant and
that finally they had to report the matter to them. However, P.W.3 is
ignorant of this letter. The Chief Manager, New Delhi office has admitted of
his personal visit to the ninth defendant on 1st March, 1981 and alleges that
he was avoiding to meet him despite the message. Therefore, the stand of
P.W.2 that he was aware of the non-delivery only on 23.2.1981 is not true.
21. Ex.A.115 and Ex.A.117, the telegrams sent by the Chief Manager,
Divisional Office, Madurai have clearly directed that the machinery was not
delivered and action should be taken against the ninth defendant. Ex.A.117
dated 5.3.1981, which is crucial, is on the following terms :
“PERSONAL ATTENTION CHIEF MANAGER ROT 26 FEBRUARY REGARDING ATHI
OFFSET PRINTERS, SIVAKASI STOP PLEASE REFER R/O MADRAS TELEX DATED 5TH
NOVEMBER TO YOU R/O MADRAS CLEARLY STATED THAT DRAFT AMOUNT SHOULD BE GOT
REFUNDED IF MACHINERY WAS NOT DISMANTLED AND LOADED ON TRUCK IN GOOD WORKING
CONDITION STOP IT APPEARS THAT AFTER DELIVERY OF DRAFT TO VENDOR, YOUR OFFICE
HAVE NOT FOLLOWED UP THE MATTER AND SEEN TO IT THAT THE MACHINERY WAS
DISMANTLED AND LOADED ON THE TRUCK. ANYWAY, WE REQUEST YOU TO PERSONALLY TAKE
UP THE MATTER WITH ALL CONCERNED AND ARRANGE FOR DESPATCH OF MACHINERY BY
APPROVED TRANSPORT UNDER TRANSIT INSURANCE OR FOR REFUND OF DRAFT TO SIVAKASI
STOP TELEXES TO POSITION AND ACTION TAKEN. CHIEF MANANGER, CENTRAL DIVISION.”
(emphasis added)
P.W.2 says that he had been taking efforts to contact the ninth defendant to
get the amount covered by the draft. On the same lines was the telegram sent
on 6.3.1981 (Ex.A.119) wherein P.W.2 admits that the first defendant had been
very anxious to get the machinery at any cost and he further reiterates as
follows :
“The first defendant had been trying their level best to get the
machinery. They were ready with money.”
The Regional Office, Madurai had been asking the New Delhi branch to
co-operate with the first defendant in delivering the machinery and to settle
the matter with the ninth defendant. He further admits that the ninth
defendant has cheated the bank. Only long thereafter, a complaint was given
by the appellant bank both against the ninth defendant as well as against
defendants 1 to 5 dated 28.5.1981. P.W.2 admits that in the F.I.R., they have
stated that the report of the Valuer is a fraudulent one. While defendant 1
to 5 had been making complaints and reports to the bank and they had admitted
the non-delivery and requested to take action against the ninth defendant, the
Sivakasi branch updates a letter from the first defendant where they say that
they are negotiating for delivery of the machinery. They have also made an
interpolation in the letter to the effect that they undertake to repay the
bank, on demand, the entire dues payable to the bank. This is another
instance to show that the bank is trying to be protective of their interest at
any cost without caring for the interest of defendants 1 to 5.
22. When the suit was filed on 28.4.1982, the plaintiffs were fully
aware that the machinery was not delivered to defendants 1 to 5 and that they
had been cheated by the ninth defendant and that the bank is also responsible
for the situation. However, it appears that a stand is taken by the bank that
defendants 1 to 5 have colluded with the ninth defendant in order to cheat the
bank and on that basis the suit has been proceeded with. The stand of the
appellant bank is totally at variance with the facts and circumstances of the
case. As rightly pointed out by the trial court, defendants 1 to 5 are the
victims and they have been deprived of a sum of Rs.2,75,000/- due to the
negligence on the part of the appellant bank. The communication of the
regional branch at Madras dated 5.11.1980 has thrown to the winds all the
safety precautions that can be expected of by allowing the encashment of the
draft even before loading of the machinery on a mere undertaking. All the
subsequent actions by getting an agreement would only show that the appellants
have taken up the responsibility and have bound themselves and were indirectly
heading for a litigation after letting the bird leave the cage. It is
ununderstandable to us as to why the bank should be satisfied by a mere
assurance or undertaking drafted by an advocate and what was the difficulty to
insist that they should not encash the draft unless the machinery was loaded
in the truck. The conduct of the bank is beyond one’s comprehension. Their
explanation that the defendants have given an undertaking of responsibility
does not improve their case any further. In such a case, they could have
straight away issued the draft to the defendants with their risk and
responsibility to procure the machinery, especially when the bank amount is
secured by hypothecation and mortgage by deposit of title deeds of defendants
1 to 5 and 6 to 8. Having from the very beginning decided to purchase the
machinery by directly giving the draft to the seller, they have changed their
course of action by allowing the encashment of the draft without the machinery
being delivered. From the evidence, it is clear that the defendants are
victims and they are the sufferers and losers because of the action on the
part of the appellant bank. The recovery of the amount from the defendants,
therefore, does not arise inasmuch as there was no delivery of the machinery
by the ninth defendant.
23. Therefore, rightly so, the prayer was restricted to a declaration
that the appellant was entitled for payment of Rs.6,44,055.14 with interest.
The trial court, in our view, has considered all the voluminous documentary
and oral evidence in the proper perspective and has rightly dismissed the
claim of the appellant as against the defendants excepting the ninth
defendant. In view of our finding that the defendants have no liability to
pay the amount, the question whether there was an alteration of the terms and
conditions of the security and whether the guarantors are liable and the
guarantee is enforceable does not arise for consideration.
24. For all these reasons, the appeal fails and it is accordingly
dismissed with costs.
Index : No (P.S.M.,J.) (K.S.,J.) Internet : Yes 19..06..2002. ab To 1. The Subordinate Judge, Srivilliputhur (With Records, if any). 2. The Record Keeper, V.R. Section, High Court, Chennai. P. SHANMUGAM, J. and K. SAMPATH, J. Judgment in A.S. No.1288 of 1986