JUDGMENT
S.R.K. Prasad, J.
1. This appeal is directed against the judgment and decree dated 24-6-1991 passed in O.S. No. 106 of 1988 on the file of the Additional Subordinate Judge, Chittoor, dismissing the suit against Defendants 2 and 3 which has been filed on the strength of an alleged mortgage of deposit of title deeds. The plaintiff is the appellant.
2. The facts that arise for consideration can be briefly stated as follows:
On 25.8.1985 the first defendant, who is the first respondent herein, applied for credit facility for his arrack and toddy business. Defendants 2 and 3, being Respondents 2 and 3 herein, agreed to provide necessary security and offered themselves to be guarantors on behalf of the first defendant to the plaintiff for payment of the amount advanced to the first defendant and they submitted the details of assets and liabilities to the plaintiff. The first defendant executed the guarantee agreement on 30-9-1985 in favour of the plaintiff. All the defendants on 30-9-1985 executed letters of lien and set off in favour of the plaintiff. On 30-9-1985 Defendants 2 and 3 executed an agreements of guarantee in favour of the plaintiff. The 2nd Defendant on 1-10-1985 deposited title deeds in respect of the properties described in A Schedule with an intention to create a valid equitable mortgage over the said property. The deposit of title deeds on 1-10-1985 has been confirmed by the letter dated 3-10-1985. The 3rd Defendant also deposited his title deeds in respect of B Schedule properties on 1-10-1985 executed guarantee agreement on 30-9-1985. The deposit of title deeds by the 3rd defendant has been confirmed by the plaintiff by letter dated 3-10-1985. The 1st Defendant requested the plaintiff bank for the issue of bank guarantees in favour of the Excise Department valid for a period of 15 months, with 30% cash margin in the form of fixed deposit and 1% commission for 15 months. The plaintiff bank issued guarantee No. 12/ 85 for a sum of Rs. 26,65,788-02 towards’ two months rental during the excise year 1985-86 and guarantee No. 12-A/85 for Rs. 2,18,915-00 being the MGQ deposit to lift MGQ of 4,37,839 liters of arrack during the excise year 1985-86. The 1st Defendant also pledged with the plaintiff the fixed deposit FDR No. 138665 dated 20.9.1985 for a sum of Rs. 8,65,450/- for 15 months due on 30-12-1986. For failure to pay the rentals by 20-7-1986 for the month of July 1986, the Excise Superintendent invoked the bank guarantee No. 12/85 on 21-7-1986 for the payment of Rs. 13,32,894.01 Ps. The plaintiff also foreclosed the FDR pledged towards the margin amount towards guarantee to the extent of Rs. 9,14,869-56 Ps., inclusive of interest of Rs. 49,419-56 Ps. As the amount for rental is not sufficient, the plaintiff remitted one month rental to the Excise Department after debiting the balance amount of Rs. 4,18,024.45 Ps., to the defaulted guarantee account of the 1st defendant. The 1st defendant also failed to pay rentals for the succeeding month of August 1986, the Excise Superintendent by his letter Rc.No. 1014/86A dated 20-8-1986 invoked the bank guarantee No. 12/85. There was no amount available in the account of the 1st defendant. The plaintiff on 26.8.1986 paid the sum of Rs. 13,32,894.01 Ps., to the Excise Department towards one month rental due for the month of August, 1986 and debited the said amount also the defaulted guarantee account of the 1st Defendant. As such a sum of Rs. 17,50,918-46 Ps., has been debited in the defaulted guarantee account of the 1st defendant. The plaintiff issued notice on 20-11-1986 demanding the amount of Rs. 15,68,078.25 Ps., with interest at the rate of 17.5% from 24-7-1986 to 31-3-1987 along with 2% penal interest and from 1-4-1987 interest at the rate of 16.5% with 2% penal interest. The defendants did not give any reply. Thereupon, the plaintiff filed the suit against the defendants for realization of the amount of Rs. 16,94,404.00.
3. The 1st Defendant remained ex parte. The 2nd Defendant filed the written statement contending that the 1st defendant made an application for credit facility on 25-8-1985. He obtained loan application from the plaintiff and filled the same in his own hand with all particulars at the house of the 2nd defendant. He mentioned the names of Defendants 2 and 3 in the said application. It was only after the plaintiff considered the application and agreed to provide credit facilities to the 1st defendant, he approached her at the instance of her husband. It is further contended that encumbrance certificate was secured at the instance of the plaintiff and title deeds of the property were sent to the plaintiff to enable him to seek opinion from its Counsel regarding the validity of the title deeds. It is also contended that the plaintiff approached her and informed that the 1st defendant applied for credit facility for a sum of Rs. 20,00,000/- as per his application and that she should provide her property as security for the said amount. The 2nd defendant told the plaintiff that she was willing to offer her property as security only to an extent of Rs. 10,00,000/- if only the plaintiff agreed to reduce the terms and conditions of the contract in writing. Thereupon, the plaintiff brought two printed forms and took her signatures on several other stamp printed and typed written forms on 2-9-1985 itself. The plaintiffs Counsel gave his opinion and asked the plaintiff to retain the title deeds that were given for legal opinion on the same day. It is further contended that the plaintiff while entering into the agreement took her signatures on printed letter of lien on 2-9-1985 itself and while taking her signatures in the agreement of guarantee the plaintiff took her signature in the second form of agreement of guarantee on the plea that the duplicate form was to be sent to the Central Office for record as such the duplicate form would be filled up for clarity in type writing in accordance with the original form in which the 2nd defendant had specified her limit of liability. It is also further alleged that the plaintiff took signatures on several other stamped and printed and type written formats on 2-9-1985 itself, the day on which the contract of bargain and the deposit of title deeds with the plaintiff were simultaneously made evidencing a single transaction. The 2nd defendant denied the allegation about the letter dated 3-10-1985 containing her intention of creating an equitable mortgage by deposit of title deeds. It is also contended that the transaction, which has been reduced into writing, namely, agreement of guarantee, requires registration as it creates interest in the immovable property. It is also contended that the whole suit is based on invalid and manipulated documents and sought for dismissal of the suit.
4. The 3rd defendant while adopting the contentions of the 2nd defendant, inter alia, contends that there was collusion in between the plaintiff and the 1st defendant to obtain a fraudulent decree by manipulating several documents. It is also contended that he is an illiterate and he has learnt only to put his signature in English. All the documents were executed in the house of his brother only. He denied about the execution of the agreement of guarantee in favour of the 2nd defendant on 30-9-1985 and execution of letter of lien etc. It is contended that the plaintiff was on the look out for a suitable building to locate its branch and there was a proposal by the plaintiff to take the building for the said purpose as his brother was constructing on Prakasham High Road, Chittoor. In this connection, the staff of the plaintiff was visiting the house and office of his brother and due to that he got acquaintance with the staff of the plaintiff. While so, in 1986 when he went to the plaintiff bank, the plaintiff showed a printed format in English in which he found the signature of the 2nd defendant and made him to believe that the 2nd defendant had applied for a loan and that his signatures were required to process her loan application and on such misrepresentation his signatures were also obtained in the said format. Since there was no space left, he has to sign below the signatures of the 2nd Defendant and his signatures were obtained with defficulty over and above the signatures of the 2nd Defendant in the space left between the contents of the format and the signatures of the 2nd Defendant. It is also contended that there was no intention of creating a valid equitable mortgage and created a charge over the same by way of security. It was a mystery how the documents had come into the possession of the plaintiff. He never gave any letter on 3-10-1985 as alleged confirming his intention of creating an equitable mortgage by the deposit of title deeds on 1-10-1985. He has absolutely no knowledge as to how the encumbrance certificates were obtained relating to his property. Hence, he sought for dismissal of the suit.
5. On the strength of the above contentions, the Court below has framed the following issues;
(1) Whether the plaintiff filed the suit with invalid, manipulated and fabricated documents in connivance with the 1st Defendant?
(2) Whether the plaintiff is entitled for suit claim?
(3) To what relief of the parties?
6. The plaintiff has examined one of the officers of the Indian Bank, who worked at Chittoor. Exs.A-1 to A-20 marked on behalf of the plaintiff. On behalf of the defendants, the 3rd Defendant was examined as D.W.1 and no exhibits were marked. After trial, the learned Additional Subordinate Judge, Chittoor decreed the suit against the 1st defendant and dismissed against Defendants 2 and 3. Aggrieved by the same, the plaintiff has preferred this appeal.
7. The points that arise for consideration are:
(1) Whether Respondents 2 and 3 have created equitable mortgage by deposit of title deeds as alleged?
(2) Whether the alleged manipulation of documents by the bank is true?
(3) Whether the appellant is entitled to the suit mortgage claim?
8. It is a case where the Court below has failed to look at the evidence in proper perspective. It has extracted the examination of P.W.1 as it is instead of evaluating the evidence in making appraisal of the same with reference to the contentions canvassed. In that view of the matter, this Court has to make appraisal of the entire evidence with reference to the contentions canvassed before this Court as there is no proper appraisal of the evidence and no attempt is made to arrive at the truth.
9. It is contended by the learned Counsel for the appellant that the signatures on the guarantee bonds and the confirmation letters regarding deposit of title deeds are admitted and the burden is on the defendants to show that there is fraud and collusion in execution of documents and they are the result of the manipulations made by the plaintiff and the first Defendant. Reliance is placed on the decision reported in Alapati Sivaramakrishnayya v. Alapati Kasi Viswanadham and two Ors., 1956 (II) An.WR 1004. It is also contended that non-examination of the 2nd Defendant is fatal to the version of the defendants and an adverse inference has to be drawn for the non-examination. Reliance is placed on the decision reported in Vidhyadhar v. Manikrao and Anr., 1993 (3) ALT 1 (SC). Reliance is also placed on the averments made in the written statements and contends that the evidence goes contra to the pleadings. Whereas the learned Counsel appearing for the respondents mainly placed reliance on the non-examination of Regional Manager of the plaintiff bank and discrepancy is found in Ex.A-1 application form and the figures found in Ex.A-5 which are said to have been made without the knowledge of Defendants 2 and 3 and failure to produce the originals. It is also contended that those circumstances indicate that the documents are not valid, manipulated and fabricated with the connivance of the first Defendant and the lower Court has rightly gave a finding about the collusion, It is also contended that Ex.A-9 requires registration, which cannot be looked into. The learned Counsel for the respondents has made a strenuous effort to demonstrate that Defendants 2 and 3 have no knowledge of English and their signatures were obtained at a place other than the office premises as the day of the alleged execution only falls on Sunday. An effort is also made to show that there was no deposit of title deeds as they were already with the bank for legal opinion and some amount towards bank guarantee was released.
10. Adverting to the said contentions canvassed, it is necessary to have a look at the pleadings once again before embarking into discussion regarding oral and documentary evidence. The plaintiff has come with a specific pleading that the first defendant applied for credit facility for his arrack and toddy business on 25-8-1985 and Defendants 2 and 3 agreed to provide necessary security and offered themselves as guarantors. They have executed letters of lien and set off on 30-9-1985 and they have also executed an agreement of guarantee on 30-9-1985. The 2nd defendant has deposited her title deed on 1-10-1985 and also executed confirmation letter on 3-10-1985. The 3rd Defendant also deposited title deeds on 1-10-1985 and also executed confirmation letter on 3-10-1985. The first defendant requested the plaintiff bank for issue of guarantee valid for 15 months with 30% cash margin and 1% commission. The 2nd defendant has contended in her own pleading that the first defendant mentioned the names of herself and the 3rd defendant for reference in the loan of the first defendant. It was at the instance of her husband, the first defendant approached her. The first defendant obtained a loan application from the plaintiff and filled the said application in his own hand with all particulars at her house. It was only after the plaintiff considered the application and agreed to provide credit facilities to the first defendant, she was willing to offer her property as security only to an extent of Rs. 10,00,000/-. Thereupon, she handed over title deeds on 2-9-1985 to the plaintiff. She denied about the execution of agreement of guarantee on 30-9-1985. She alleged that the plaintiff brought two printed forms of agreement of guarantee and sought her signatures on them. The plaintiff also took her signature in the second form of agreement of guarantee on the plea that the duplicate form was to be sent to the Central office for record, as the duplicate form would be filled up for clarity in type writing. She denies about deposit of title deeds on 1-10-1985 and 31-10-1985. A close scrutiny of the entire pleadings would go to show that the application form itself was filled up by the bank officials at the house of the 2nd defendant and she stood as guarantor at the instance of her husband and she was prepared to give security only to the tune of Rs. 10,00,000/-. It is also alleged by her that the plaintiff took signatures on the agreement of guarantee. It is alleged that the plaintiff while entering agreement of bargain took her signature in printed letter of lien on 30-9-1985. It is also her version that the plaintiff took signatures on several other papers. Unfortunately, she was not examined. Her contentions are not substantiated regarding the alleged manipulations or misrepresentations made by the Manager of the plaintiff bank. When a person comes with the plea of fraud of manipulation and misrepresentation, the burden is on him to prove the same beyond all reasonable doubt. The Supreme Court in Vidhyadhar v. Manikrao (supra ) at paras 14 and 15 held as under:
“14. It was Defendant No. 1 who contended that the sale deed, executed by Defendant No. 2 in favour of the plaintiff, was fictitious and the whole transaction was a bogus transaction as only Rs. 500/- were paid as sale consideration to Defendant No. 2. He further claimed that payment of Rs. 4,500/- to Defendant No. 2 at his home before the registration of the deed was wholly incorrect. This plea was not supported by Defendant No. 1 as he did not enter into the witness box. He did not state the facts pleaded in the written statement on oath in the Trial Court and avoided the witness box so that he may not be cross-examined. This by itself, is enough to reject the claim that the transaction of sale between Defendant No. 2 and the plaintiff was a bogus transaction.
15. Where a party to the suit does not appear into the witness box and state his own case on oath and does not offer himself to be cross-examined by the other side, a presumption would arise that the case set up by him is not correct as has been held in a series of decisions passed by various High Courts and the Privy Council beginning from the decision in Sardar Gurbakhsh Singh v. Gurdial Singh and Anr., AIR 1927 PC 230. This was followed by the Lahore High Court in Kirpa Singh v. Ajaipal Singh and Ors., AIR 1930 Lah. 1 and the Bombay High Court in Martand Pandharinath Chaudhari v. Radhabai Krishnarao Deshmukh, AIR 1931 Bom. 97. The Madhya Pradesh High Court in Gulla Kharagjit Carpenter v. Narsingh Nandkishore Rawat, , also followed the Privy Council decision in Sardar Gurbakhsh Singh’s case. The Allahabad High Court in Arjun Singh v. Virender Nath and Anr., held that if a party abstains from entering the witness box, it would give rise to an inference adverse against him. Similary, a Division Bench of the Punjab and Haryana High Court in Bhagwan Dass v. Bhishan Chand and Ors., , drew a presumption under Section 114 of the Evidence Act against a party who did not enter into the witness box.”
The Supreme Court has categorically stated in the aforesaid decision that presumption has to be drawn under Section 114 of the Evidence Act against a party who did not enter into witness box to prove the case set up by him. Such a presumption has to be drawn under Section 114 of the Evidence Act insofar as the 2nd defendant is concerned. Hence, it is rightly contended by the learned Counsel for the appellant that presumption has to be drawn for the non-examination of the 2nd defendant and her version raised in her pleading has to be disbelieved.
11. Coming to the pleadings of the 3rd defendant, the 3rd defendant also adopts the alleged plea of fraudulent manipulation and collusion in between the plaintiff and the 1st Defendant while adopting the written statement filed by the 2nd Defendant. He has contended of only putting his signatures in English. He was living with his brother at Santhapet during the relevant period and all the documents, were executed in the house of his brother only. It is also pleaded that the plaintiff frequently visiting the house of his brother as he was constructing a building at Prakasam High Road, Chittoor and that the plaintiff had a proposal to take the building for the bank. It is also the case of the 3rd defendant that in 1986 when the Branch Manager sent for him and on his going to the Bank the plaintiff showed printed format in English in which he found the signatures of the 2nd defendant and made him to believe that the 2nd defendant had applied for a loan to the bank and that his signatures were required to process her loan application and on such fraudulent misrepresentation his signatures were obtained in the said format in which he found the signatures of the 2nd defendant. He pleads that he was helping his sister-in-law by putting his signatures on various papers. He has expressed his ignorance as to how the documents have come into the possession of the plaintiff. He died about giving any letter of lien on 3-10-1985. He has asserted that he has no intention to create equitable mortgage by deposit of title deeds on 1-10-1985. In the above scenario the evidence placed has to be examined. P.W.1 is the Manager of Indian Bank at Chittoor Branch, who worked from June, 1984 to September, 1986, speaks about the application given by the first defendant for credit facility for Rs. 40,00,000/-. He has only produced Ex.A-1 copy of the application. It is also his version that additional security belonging to Defendants 2 and 3 is mentioned in Ex.A-1(a). According to him, Ex.A-2 is the document filed by the first defendant showing his assets and liabilities. Similarly, Ex.A-3 is the document showing the assets and liabilities of the 3rd defendant. Ex.A-4 is the similar document of the assets and liabilities of the 2nd defendant. It is mainly contended by the learned Counsel appearing for the respondents that the original documents have been suppressed, which are material, and hence they have to be nonsuited for suppression of the important documents. He has placed reliance on the decisions reported in N. Eranna Rao v. Vitta Dodda Hanumanthappa Subbayya Setty and Co., , Brahmdeo Narain Singh v. Members of the Notified Area Committee, , and Gurnam Singh and Ors. v. Surjit Singh and Ors., . The principles laid down by the Supreme Court in the above decisions clearly indicate that adverse inference is justified to be drawn for the suppression of the documents when the party in possession does not produce the originals. The entire contentions of the respondents concentrated mainly on the discrepancies found in the said application. No doubt, originals are not produced. The plaintiff has not made out a case for letting in secondary evidence. It is not the case that originals are not available in their office. It is the case of the 2nd defendant that D.1 has applied for loan and the applications are filled up at their house. The 2nd defendant is the wife of Member of Parliament. The 3rd defendant is the Municipal Chairman. P.W.1 is an officer in respect of a particular branch. Is he capable of manipulating the documents in respect of politicians? Even according to the evidence of D.W.1 he stood as guarantor for others and suits were filed by other banks against him. If the cumulative effect of these circumstances including the pleadings have taken into consideration, it makes clear that the first defendant applied for loan and Defendants 2 and 3 in all probability offered security and handed over title deeds. Even according to the evidence of D.W.1 in February or March, 1986 the bank people obtained his signatures on certain documents making him to believe that his sister-in-law had applied for a loan. According to him he was doing wine business since two years and studied up to 6th class in Tamil medium. He did excise contracts for two years. He expressed his ignorance about the written statement filed by his sister-in-law. He did not give any instructions to his Counsel to file a memo adopting the written statement of D-2. His Counsel said not read over and explain the contents of written statement filed by him on his behalf. He admits that he stood as guarantor to Ramachandra Gupta for rupees ninety lakhs loan. He admits about receipt of legal notice from the plaintiff bank. The entire evidence goes to show that he signed on the documents in English. His complaint is that the documents are not read over to him at the time of taking signatures. It is too much to contend that he has signed on seeing the signatures of his sister-in-law, who is said to have applied for the loan. This cannot be believed since he is an arrack contractor and also stood as guarantor to others for obtaining loans from the banks. It is improbable for the bank officials to manipulate the documents in collusion with the first defendant. If the conduct of the defendants is judged, it is clear that notice has been issued by the bank under Exhibits A17 and A-19 and no reply has been given by the defendants. The said conduct or failure to give reply would only go to show that it was against the conduct of a prudent person to keep silent when the documents were manipulated and fraud was played. Moreover, the failure to initiate action immediately against the bank officials for manipulation will throw doubt about the different versions given out by D.W.1. The version of D.W.1 is not consistent when compared with the documentary evidence. No doubt the application forms cannot be looked into for failure to make out the case for admission of secondary evidence and there is no need to judge the said inadmissible documents. In the absence of production of originals, one cannot make a cryptic analysis of those documents. Moreover, the 3rd Defendant has adopted the statement of the 2nd defendant and she has admitted in her own pleadings that the documents were executed at her house and the loan application was presented at the house. In the light of the said evidence, it can safely be taken that the first defendant has approached the bank for loan and Defendants 2 and 3 stood as guarantors.
12. Coming to the aspect of fraud and misrepresentation, it is an agreement of guarantee said to have been executed by Defendants 2 and 3. The signatures are admitted by the 2nd Defendant in her written statement and the 3rd defendant in his evidence. It is clearly stated by the Division Bench of this Court in Alapati Sivaramakrishnayya v. Alapati Kasi, Viswanadham (supra) at page 1008 as under:
“Before we discuss the question of burden of proof in a case of this character, it is necessary to point that the word ‘Execution’ is hardly apt when used in regard to the drafting of a letter and is only appropriate in regard to a deed or instrument, as in such cases certain formalities are insisted upon by law and they are to be followed by the executant in order to make the document effective in law. Where, as in the case of a Will, the law requires the attestation by two witnesses of the signature of the testator, there can be no execution, as such, unless the procedure prescribed by the law in regard to attestation is followed. A piece of paper, though styled a Will and though it may contain the alleged testator’s signature will not be a Will unless it has been executed in the manner prescribed by law. So also is the case with other documents where definite formal requirements are prescribed. Nobody can be said to have executed a mortgage bond merely by signing a document called a mortgage deed. But, in the case of a letter where there can be no possible question of ‘execution’ in this sense, proof of a man’s signature under it is surely prima facie proof that the contents of the letter are attributable to this authorship. If a man denies that he has written a letter which contains his signature, then surely he must prove what he alleges, i.e., that the letter was got up on a blank piece of paper containing his signature, as also the circumstances in which he happened to put his signature on such a piece of paper. There is no question of proving the ‘execution’ of a letter by the signatory. Even where formal execution as such has got to be proved, cases have held that where a man’s signature appears in a document at the place where the executant of such a document would normally sign, then the signature may prima facie be taken as having been put in token of execution and that therefore proof or admission of a signature in a document requiring the execution in a particular form is prima facie proof that the document was executed by the signatory, because, normally, it has to be presumed under Section 114 of the Evidence Act that a person only puts a signature in a document in token of his execution thereof. But the present one, it seems to us, is an afortiori case because here, there is no question of any execution.
We are in respectful agreement with the view so expressed. We may also note that in the case of a promissory note, a Full Bench of the Rangoon High Court in J.K. Shaha v. Dulab Meah, (1939) Rang.L.R 397, overruling a contrary view taken in Hoe Moh v. Seedat, (1927) ILR 5 Rang. 527, held that where the plaintiff sues on a promissory note, and the defendant admits, (or has had proved against him conclusively) his signature or his thumb impression on the promissory note, but asserts that he did not sign the promissory note in the condition in which it is filed, the burden is on the defendant to prove that the promissory note is not what it appears to be. Our attention has also been drawn to the decision of a Single Judge of the Mysore High Court in Lakshmamma v. M. Jayaram, AIR 1952 Mys. 114. It was held in that case that where a party alleges that he affixed his signature or thumb impression on a blank paper on which the document must have been written later he has to prove that fact and that if he fails to do so, the presumption is against him. As already stated, in this case there is no question of any execution at all and therefore, it seems to us that the burden of satisfying the Court that the signatures were inserted upon a blank piece of paper squarely rests on the plaintiffs and if they fail to discharge such burden, it must be presumed that the contents of Exhibit B-8 having been subscribed to by the 1st plaintiff and his brother are true and binding upon them.”
13. When some of the signatures are admitted by one of the defendants, it is for the other defendants to show as to how and in what circumstances the documents are manipulated. The 2nd defendant is not prepared to go into the witness box and D.W.1 contends that on seeing the signatures of his sister-in-law he signed on the documents as she was applying for loan. P.W.1 spoke to the execution of those documents. As per the evidence of P.W.1, D.W.2 also executed letter of confirmation of equitable mortgage. Is it possible for the bank officials to secure sale deeds without being handed over? Those documents were available with Defendants 2 and 3 only. Moreover, the first defendant was a stranger and he could not have access to the title deeds of Defendants 2 and 3. It is also clear that the 2nd Defendant has not offered any explanation for the possession of those registered title deeds. D.W.1 states that the title deeds are with his brother. He does not know how they have reached the bank. D.W.1 is not prepared to speak the truth. His conduct shows that he was in the habit of standing as guarantee for several loans and suits are also filed by the banks for realization of the amounts. Even according to him, he can speak Telugu and English, but he cannot read them. The explanation given by him is that they have acquaintance with the bank people who used to visit his brother’s house where he is staying. In that connection, he got acquaintance. No explanation is forthcoming as to how the bank came into possession. That can be best explained only if the version of P.W.1 is accepted, namely, deposit of title deeds. It is also clear that legal advice was taken at the first instance and later confirmation letters were given to P.W.1. The conduct of non-issuing of reply to the registered notice and remaining silent in spite of loan application being taken on Sunday only show that discretion has been exercised by the bank officials for sanctioning of loan. The various defects pointed out by the learned Counsel for the respondents regarding the loan application cannot in any way affect the transactions, namely, sanctioning of loan and accepting of title deeds as security for the loan by creating equitable mortgage. The acquaintance in between D.W.1 and the bank officials as spoken to and D.W.1 admitting his signatures on the bonds and the admission of the 2nd defendant in her written statement that she has agreed to stand as guarantor only for Rs. 10,00,000/- as well as giving the title deeds will only show and probabilise that they executed guarantee deeds and Defendants 2 and 3 are prepared to stand as sureties. Section 58 of the Transfer of Property Act, 1882 says that where a person delivers to a creditor or his agent documents of title to immovable property with intent to create a security thereon, the transaction is called a mortgage by deposit of title deeds. The said provision of the Act makes it clear that the deposit can be made personally or constructive. In view of the same, we are of considered view that the title deeds were handed over along with loan application by mentioning the particulars of properties offered as security. Subsequently, the record shows that as per the evidence of P.W.1 they were referred to legal opinion and the 2nd defendant agreed to stand as guarantor for Rs. 10,00,000/- as security. What is culled out from the evidence of D.W.1 is that the 1st defendant requisitioned the bank officials to their house and handed over the loan application. The non-filing of written statement by D-1 cannot lead to the conclusion that there was collusion. The alleged collusion canvassed by the defendants have no legs to stand in view of the fact that the 2nd defendant admitted in the written statement about presenting the application by the first defendant. The learned Additional Subordinate Judge has carried away with the defects noticed in the loan application and also presenting the application to the Manager on a Sunday. They become insignificant since the 2nd defendant has admitted in the written statement about presenting of loan application to the bank seeking for loan and standing as guarantor for the tune of Rs. 10,00,000/-. The evidence of D.W.1 does not inspire confidence from the fact that he expressed ignorance of his title deeds themselves being in the hands of bank officials. It goes contra to his own pleadings. The alleged fraudulent misrepresentation said to have been made is not clearly mentioned in his evidence. The details of fraud are not pleaded. The date of fraud, the place of fraud and the manner of playing fraud are not spoken to in detail in D.W.1’s evidence. Be that as it may, D.W.1 is not a layman. He is a person holding a responsible post. He has obtained loans from the banks as Chairman of the Municipality. He has not issued any reply when deposit of title deeds is alleged in the registered notice. In the light of the above circumstances, if the evidence is to be judged, it can be safely taken that he is not speaking truth. He is trying to hide the truth. In that view of the matter, we are of considered view that the version given out by P.W.1 rendered along with the non-issue of a reply to the notice only indicates the alleged acceptance of creation of valid mortgage by treating the deposit of title deeds. Moreover, no action was taken against the bank officials for obtaining signatures on blank papers or printed formats. The story given out by D.W.1 cannot be believed as it does not fit into his own evidence and pleading. It goes contra to the pleading of the 2nd Defendant which is also adopted. The above documentary evidence and the conduct of Defendants 2 and 3 indicate and probabilise that they have deposited the title deeds with an intention to stand surety and create mortgage by deposit of title deeds for the loan secured by the first Defendant.
14. It is also contended by the learned Counsel appearing for the respondents that amount was released even before the acceptance of the security. It is also further contended that no investigation was made regarding solvency and the sureties and hence the deposit has to be disbelieved.
15. Adverting to the same, the said conduct would only show that all is not well in the bank transaction. The fact that the loan application was received on Sunday and processed it only indicates that there was something in between the bank officials and the defendants in getting loan sanctioned and released. The failure to investigate about the solvency would only show that there was negligence on the part of the Branch Manager. The material placed before the Court on the circumstances canvassed regarding correction does not lead to the conclusion that the 2nd defendant is prepared to stand as surety for Rs. 10,00,000/- only and the same does not stand for judicial scrutiny in the absence of the evidence placed before the Court who pleads the same. Hence, we have already stated that non-examination of the 2nd defendant is fatal to the version of the defendants. It is the case of the 2nd defendant that they stood surety for- a particular period What she pleads is that she was prepared to stand as surety for Rs. 10,00,000/- only. It is not case of D.W.1 that he wanted to stand surety for six months only. The original records have not been placed before the Court and the bank officials have suppressed them. But the period for which they stood as surety have to be culled out from the other documents placed before the Court, namely, the confirmation letters said to have been executed by them as well as from the letters of lien and set off etc. If Exhibits A-6 to A-8 are perused, it is clear that the deposit of title deeds is made to the loan sanctioned. No specific period was mentioned in the confirmation letters. If all these aspects are considered, what transpired on 30-9-1985 and 1-10-1985 is that confirmation letters treating as deposit of title deeds were executed on 3-10-1985. Whereas, deposit is said to have been made on 1-10-1985 and guarantee letters were executed on 30-9-1985. It is clear that Defendants 2 and 3 stood as guarantee for Rs. 30,00,000/-only. It can be safely taken from the said documentary evidence as spoken to by D.W.1 that mortgage was created for Rs. 30,00,000/- towards loan and not for Rs. 40,00,000/-. The version given out by the 2nd Defendant is not correct in view of the words mentioned in her guarantee letter.
16. Another contention canvassed by the learned Counsel for the respondents is that the guarantee gets discharged since additional security has been taken, as they have no knowledge of the execution of additional security. Insofar as additional security taken from the debtor, namely, D-1 is concerned, it can be safely taken that guarantors cannot be made liable unless they are made aware. In any view of the matter, their liability has to be limited to Rs. 30,00,000/- only as the sureties are prepared to stand for Rs. 30,00,000/-. Moreover, Exhibits A-12 and A-13 do not prevent the bank officials to increase the limit of liability in view of the guarantee bond of Ex.A-9. We respectfully disagree with the contentions canvassed that the sureties get discharged by the additional security demanded by the bank and provided by D-1. The deposits shall be treated only to the extent of Rs. 30,00,000/- only along with interests and costs as was undertaken under the deed of guarantee. D-1 is not contesting the same about the non-mentioning of the date and the guarantee letter executed by him cannot in any way show that he did not stand as guarantee. It is a case where there is negligence on the part of the bank official in not putting the date and he is liable for action. When D-l is not contesting, it will not have much consequence. That the fact was not in any way show or belie fact of standing as guarantee by Defendants 2 and 3 since the date was mentioned in execution of the agreement of guarantee by Defendants 2 and 3 under Ex.A-9. The decisions referred to by the Court below, namely, S. Perumal Reddiar v. Bank of Baroda and Ors., , The State Bank of Saurashtra v. Chitranjan Ranganatha Raja and Anr., and The Indian Bank, Madras v. Krishnaswamy and Ors., , have no application to the facts of the case. Hence, we respectfully disagree with the contentions canvassed by the learned Counsel for the respondents.
17. Coming to the aspect of production of account copies, true copies of the accounts being Ex.A-20 are produced before Court and this Court has questioned as to how true copies could be marked and relied on. The Counsel appearing for the appellant has contended that they are admissible under the provisions of the Bankers’ Books Evidence Act, 1891. It is also contended that the said true copies of the accounts marked as Ex.A-2 is admissible as the endorsement is a valid endorsement. It is also contended that the endorsement required under Section 2(8) of the Bankers’ Books Evidence Act is only directory and not mandatory and the said copies can be acted upon. Reliance is placed by him on a decision reported in Radheshyam G. Garg v. Smt. Safiyabai Ibrahim Lightwalla, . Whereas, the learned Counsel for the respondents has contended that reliance cannot be placed on said true copies of the documents which goes contra to the provisions of Clause (8) of the Bankers’ Books Evidence Act and placed reliance on the decision reported in Fatima Bee Bee v. Official Trustee, AIR 1941 Rangoon 344, and United Bank of India Ltd. v. Nederlandsche Standard Bank, .
18. Before adverting to the said contentions, it is necessary to have a look at Section 2(8) of the Bankers’ Books Evidence Act, 1891, which reads as follows:
“(8) ‘certified copy’ means a copy of any entry in the books of a bank together with a certificate written at the foot of such copy that it is a true copy of such entry, that such entry is contained in one of the ordinary books of the bank and was made in the usual and ordinary course of business, and that such book is still in the custody of the bank and where the copy was obtained by a mechanical or other process which in itself ensured the accuracy of the copy, a further certificate to that effect, but where the book from which such copy was prepared has been destroyed in the usual course of the bank’s business after the date on which the copy had been so prepared, a further certificate to that effect, each such certificate being dated and subscribed by the principal accountant or manager of the bank with his name and official title.”
19. The interpretation put on to the said provision by the Bombay High Court in Radheshyam G. Garg v. Smt. Safiyabai Ibrahim Lightwalla (supra) is that the certified copy are not mandatory but only directory. But it is stated in this decision that there is sufficient compliance depending upon the facts and circumstances of each case. It is stated in United Bank of India Ltd., v. Nederlandsche Standard Bank (supra) at para 42 as under:
“Next Mr. Mitter comments bitterly on the manner in which this entry had been disclosed by the plaintiff’s solicitor in the affidavit of documents. It is described as Item 31 “Copy “of relevant entries in the Overdraft Cheque Passing Register of the plaintiff. This is obviously bad disclosure according to all law relating to discovery. It does not specify even the date of the entry, the 5th January, 1948. This affidavit was affirmed on the 29th August, 1949. The document which ultimately came to be produced in Court under Item 31 of the affidavit of documents is marked Ex.S, and is said to be “Certified as true copy”. It is signed by K.P. Sen, the plaintiff’s witness. This document was prepared under the advice of he plaintiffs solicitor Sri S.N. Sen of 10, Old Post Office Street, Calcutta. The letter dated 25th August, 1949, and the answer to question 22 of K.P. Sen show that the plaintiff Bank was asked by its solicitor to give a certified copy. In fact, to quote the language of the answer of K.P. Sen the witness, his evidence is, “we were asked by our solicitor to give a certified copy.” This is criticized by Mr. Mitter because this is not certified according to the Bankers’ Books Evidence Act for the good reason that under that Statute a certified copy means a copy of any entry in the books of a bank together with a certificate written at the foot of such copy:
“that it is a true copy of such entry, that such entry is contained in one of the ordinary books of the bank and was made in the usual and ordinary course of business, and that such book is still in the custody of the Bank, such certificate being dated and subscribed by the principal accountant or manager of the bank with his name and official title”.
This certificate which is appended to the document Ex.S does not observe most of these restrictions. It does not give the date; it does not say that the book from which the copy is being made is in the custody of the bank. It was therefore perhaps realized that this will not go in under the Bankers’ Books Evidence Act. It is good to remember that it was not disclosed even as a certified copy in the affidavit of documents. Therefore the witness K.P. Sen came to prove this document by showing his signature at the end of the certificate. Mr. Mitter, therefore, contends that if on the 25th August, 1949 according to the bank’s letter to its solicitor this document was being prepared and sent to him, then, at any rate, with its date and proper description it should have been disclosed in the affidavit of documents which was affirmed almost contemporaneously on the 29th August, 1949, within a period of four days from the preparation of the document.”
It is clearly held in Fatima Bee Bee v. Official Trustee (supra) as under:
“Even if Ex.S were admissible it would at best have been secondary evidence so far as it went of the passing of the cheques and it could only be used to that extent if secondary evidence were admissible. Section 4, Bankers’ Books Evidence Act, 1891, provides no more than that subject to the provisions of the Act a certified copy of any entry in a banker’s book shall, in all legal proceedings, be received as prima facie evidence of the existence of such entry and shall be admitted as evidence of the matters, transactions and accounts therein recorded in every case where, and to the same extent as the original entry itself is now by law admissible, but not further or otherwise. Exhibit S was wrongly admitted in evidence. Its defects were immediately pointed out by the learned advocate for the defendants. Nevertheless P. David was examined with reference to the document with a view to supply the omissions from it. He stated it was certified by a Mr. Meyer, sub-accountant of the bank, who signed for the manager. That he may have had authority to sign for the manager is beside the point. He was neither the principal accountant nor the manager of the bank who alone could certify the document. The certificate reads: ‘We certify that this is a true extract from the books of the bank’.”
20. The Rangoon and Calcutta High Courts have taken one line of view, whereas the Bombay High Court has taken a different view. The provisions are required to be interpreted. The question is whether the documents, which do not contain the endorsement as required under Section 2(8) of the Bankers’ Books Evidence Act can be treated as certified copy or cannot be treated as certified copy within the meaning of the said section. The intention of the framers of the said Act is clear that whenever the document is treated as certified copy it shall contain the endorsement. Mere mention of true copy cannot lead to the conclusion that it is a certified copy. There is lot of significance in insisting upon the endorsement due to the reason that originals are not being produced into Court even for the purpose of comparison. The statute gives exemption under the Bankers’ Books Evidence Act from production of the originals. It lays down a particular procedure to produce the copies, which can be treated as certified copies. Moreover, in the present case, the certified copy does not contain the seal and stamp of the bank. The statute has specified the nature of the certificate to be endorsed. It is not the intention of the legislature to treat it as directory. It is mandatory. It cannot be treated as certified copy, since endorsement mentioned by the statute is not made. It is a safeguard placed on the extracts for acting on them as evidence in truth. Moreover, it is stated by the Supreme Court in Chandradhar Goswami v. Gauhati Bank, , as under:
“No person can be charged with liability merely on the basis of entries in books of account, even where such books of account are kept in the regular course of business. There has to be further evidence to prove payment of the money which may appear in the books of account in order that a person may be charged with liability thereunder, except where the person to be charged accepts the correctness of the books of account and does not challenge them. The original entries alone under Section 34 of Evidence Act would not be sufficient to charge any person with liability and as such copies produced under Section 4 of the Bankers’ Books Evidence Act obviously cannot charge any person with liability.”
21. The Supreme Court has categorically stated that prima facie some body must speak to those contents in order to prove the accounts. In this case, P.W.1 spoke to the same. But in the absence of the certificate issued as required under Section 2(8) of the Bankers’ Books Evidence Act, it can not be acted upon. We once again state that the endorsement required under Section 2(8) of the Act is sine qua non in order to treat a copy as true copy. Unless it contains the said endorsement, the statutory benefits under the said provision cannot be extended. We are of the view that it is only intended to extend the statutory benefits due to non-production of the originals and Court has to act upon the certified copy only when the endorsement is made by the responsible officer with seal and stamp of the bank.
22. Coming to the aspect of interest, different rates of interest were mentioned in the pleadings. The guarantee letters do not make a mention of the actual rate of interest. The letters of lien and set off also do not mention the rate of interest. In the absence of making a mention of the rate of interest in the guarantee bonds, we are of considered view that interest has to be granted at the rate of 6% on the decretal amount from the date of the suit till realization, the observations of this Court in Radha Agencies v. Vijaya Bank, , equally apply to the facts of this case. This is one such case where there are lapses on the part of the bank officials and the parties who are responsible to indulge in a transaction on holiday and speaking half-truth by suppressing the truth. Such things shall not be encouraged by Courts by whatever quarter they emanate and howsoever influential they may be.
23. Coming to the aspect of registration of the documents, namely, guarantee letter and the letter of confirmation given, they do not require any registration.
24. On a reappraisal of the entire evidence, we conclude that the Court below has not properly appraised the evidence on the right lines. It has concentrated more on the discussion with regard to the loan application, which is admittedly presented by the first defendant and also admitted in the pleadings by the 2nd Defendant. We find on the strength of reliable evidence of P.W.1 supported by documentary evidence that loan was sanctioned to the 1st defendant and defendants 2 and 3 stood as guarantors and executed agreements of guarantee. They have also executed letters of confirmation and deposited title deeds and furnished security to the tune of Rs. 30,00,000/- only excluding the interest and costs. We also state that true copy of the accounts produced before the Court cannot be acted upon in the absence of certificate required to be made on the account as per Section 2(8) of B.B.E. Act.
25. In the result, the judgment and decree dated 24-6-1991 passed in O.S. No. 106 of 1988 on the file of the Additional Subordinate Judge, Chittoor, dismissing the suit against Defendants 2 and 3 is set aside. A preliminary decree for mortgage is passed against Defendants 2 and 3 in addition to the decree already passed. The liability of Defendants 2 and 3 is fixed to the turn of Rs. 30,00,000/- excluding the interest and costs. Interest at the rate of 6% per annum only is granted from the date of filing of the suit up to redemption and from the date of redemption to the date of realization. Personal decrees against Defendants 1 and 3 alone are passed and they are liable to be executed when the remedies are exhausted against the mortgaged properties. Defendants 2 and 3 shall pay the costs to the appellant herein. Time for redemption is four months.
The appeal is, accordingly, allowed.