Decided on July 24,2003



S.K.Mohapatra, - (1.)THE applicant Allahabad Bank, Doranda Branch, Ranchi had presented this Application under Section 19 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (hereinafter referred to as Act) in DRT, Patna on 8.12.1998 against the defendants for recovery of debts of Rs. 1,03,61,676.00 paisa as on 8.12.1998 and thereafter with pendente lite and future interest @ 21.75% per annum from 9.12.1998 with quarterly rests including cost. THE application was numbered as O.A. 193/1998 and during the pendency of the same with the establishment of Debts Recovery Tribunal, Ranchi for the State of Jharkhand, the application was received on transfer in this Tribunal and renumbered as O.A. No. 17/2002.
(2.)1. The brief facts of the case of the Applicant as stated in the application are that the Applicant Bank is a Body Corporate constituted under the Banking Companies (Acquisition of Transfer of Undertakings) Act, 1973, having its Head Office at 2, Netaji Subhas Road, Calcutta-700 001 and one of its Branch Office at Doranda Branch, Ranchi, Jharkhand. Defendant No. 1 is a Partnership Firm carrying on business of Handling Agent/Distributing Agent of Kalyanpur Cement Ltd. Defendant Nos. 2 and 3 are its Partners and defendant No. 4 is the Guarantor. Defendant Nos. 1, 2 and 3 submitted application on 20.1.1994 for financial assistance and on considering the application, applicant Bank sanctioned Cash Credit limits of Rs. 18.50 lacs and Overdraft facility (Book Debts) of Rs. 4.50 lacs vide sanctioned letter dated 26.4.1994. Defendant Nos. 1, 2 and 3 accepted the terms and conditions and executed various documents like Demand Promissory Note, Deed of Hypothecation, etc. Defendant No. 4 along with defendant Nos. 2 and 3 have personally guaranteed the due repayment of the loan amount of Rs. 23 lacs. That apart, defendant No. 3 created equitable mortgage by depositing title deed of property as mentioned at Schedule "A" of the Original Application. Defendant No. 4 also created equitable mortgage over her property as mentioned in Schedule "B" of the application. On 20.2.1995 the borrower requested the applicant Bank for further enhancement of the loan. Accordingly, the following facilities were sanctioned:

2.2. Defendant Nos. 2 and 3 for defendant No. 1 accepted the aforesaid enhanced sanction of loan and executed various agreements like Promissory Note, Deed of Hypothecation, etc. Defendant Nos. 2, 3 and 4 have personally guaranteed the due repayment of the enhanced loan. Supplemental mortgage was executed in respect of the properties described in Schedules "A" and "B" to secure the enhanced limit. Besides defendant No. 2 also deposited two sale deeds of the property mentioned in Schedules "C" and "D" of the Original Application to create equitable mortgage by way of collateral security. It is relevant to mention that defendants have not availed Bank Guarantee limit of Rs. 25 lacs. Defendant borrower confirmed the balance both Cash Credit and Overdraft accounts on 3.7.1996. Since the borrower failed and neglect to operate the account in the agreed manner legal notice was sent on 20.11.1996 but without any avail. Hence this application.

Under Section 19(4)of the Act and Rule 11 of DRT Procedure Rules of 1993, notices were served to each of the defendants by DRT, Patna. It is seen that all the defendants have appeared to contest the case. I have heard the arguments of both the parties and have also carefully perused the case records, evidences and written arguments, filed by both the parties.

(3.)THE Applicant Bank has filed evidence by way of affidavit of Sri Bidyut Banerjee, Senior Manager on 23.6.1999 and of Sri Devendra Kumar Singh, s/olateL.N. Singh, who at the material time was Manager, on 5.8.1999 before DRT, Patna. THE Applicant Bank has also filed and relied on the documents, the details of which are as follows:

5. It is seen that the cause of action arose at Hinoo, Ranchi within the territory of the State of Jharkhand and the suit claim as on the date of filing the application exceeds Rs. 10 lacs. THErefore, this Tribunal has the territorial as well as pecuniary jurisdiction to adjudicate the instant application.

6.1. THE main objection of the defendants is that the instant application is hopelessly barred by limitation. It is their specific case that signatures on blank forms were taken by the Bank which were subsequently used for extending the date of limitation. Defendants have contended that they have not confirmed the balance debts and executed D.P. Note on 3.7.1996. It is their case that there is no date below the defendant borrower's signature. In this connection, they have referred the judgment of Hon'ble Patna High Court reported in 1992(1) Civil LJ 503 (Para 8), wherein it was inter alia observed that 'the fact that no date appears below any of the signatures of the appellant clearly goes to lend support to his contention that he was compelled to sign on the blank sheets of papers'. Defendants have also stated that the said acknowledgement dated 3.7.1996 was in favour of Manager of the Allahabad Bank and not in favour of the applicant. It ;s also pointed out that in the said D.P. Note dated 3.7.1996, the amount in figures has been shown as Rs. 61,82,994/- whereas, in words it has been mentioned differently as sixty one thousands, eighty two thousands nine hundred ninety four. Accordingly, it is the contention of the defendants that the said acknowledgement-cum-D.P. Note dated 3.7.1996 should not be taken into account and in that case the instant application will be clearly barred by limitation.

6.2. I have perused the written arguments of the Applicant Bank. THE admitted fact remains that the Demand Promissory Note dated 3.7.1996 as at Sl. No. 34 at Para 4 is in favour of Manager, Allahabad Bank. Moreover, the amount of the instrument as shown in figure is different from the amount as shown in words. Thus strict grammatical interpretation will reveal that the instrument in question is defective, even though the detects may be termed as technical being clerical mistakes. Coming down to the signatures on the instrument, it is seen that even though no date is given under the signatures, the instrument is dated 3.7.1996 and cannot be termed as un-dated. THE Hon'ble High Court's order relied on by the defendants is based on different factual scenario. More so, the same has been reversed by the judgment of Hon'ble Divisional Bench, reported in 2002(1) Bank CLR 687 (Patna).

6.3. Even if the aforesaid D.P. Note dated 3.7.1996 is not considered, this Court would find that the instant application is with inlimitation by application of Article 1 of Limitation Act.

6.4. Article 1 of the Limitation Act clearly says that for the balance due on a mutual, Open and Current Account, where there have been reciprocal demand between the parties, the period of limitation is 3 years from the close of the year in which the last item admitted or proved is entered into the account. THE Open and Current Account means the running and unsettled account. In the present case the loan was enhanced on 2.5.1995. THE defendant borrower has withdrawn amount from the accounts whenever needed and deposited amounts in the account at their convenience. Defendant borrower has not settled or closed the account any time. As long as the account is not closed it will remain open, mutual and current, and the character of the accounts will not change. THE defendants have deposited Rs. 50,000/- in O.D Account on 15.11.1995 and Rs. 25,000/- on 6.10.1995 in C.C. Account. Accordingly, under Article 1, the period of limitation would start running from the end of the year 1995. THErefore, the 3 years limitation period starting from 31.12.1995 is up to 31.12.1998. THE present application has been filed on 8.12.1998' i.e. within 3 years from the close of the year 1995 in which last credit was made. It is further pertinent to note that since enhancement of loan was made and availed in 1995, the 3 years' limitation will run from end of the year 1995.

6.5. In this connection, it is pertinent to refer to the decision in the case of Parsuraman v. Purushottam, AIR 1977 Kerala 132, and also the case of Gurdinomal v. Usto, AIR 1943 Sind 26, wherein it was observed that "the period of limitation runs from the close of the year in which the last item was admitted or proved. If a mutual, open and current account be adjusted in the middle of a current year and in that year there is entered one item admitted or proved, limitation will run from the end of the year and not from the date of adjustment".

6.6. In the case of K.K. Abraham v. N.K. Abraham, AIR 1978 Madras 56, the accounts of the plaintiff were closed on 31.12.1966 and suit was filed on 23.12.1969, was held to be within the time though the last of the dealings between the parties took place on 23.7.1966.

6.7. THE Applicant Bank have also relied on the judgment of Hon'ble Division Bench of Patna High Court reported in PLJR 2000(4) 432, wherein it was observed that Banks and Financial Institutions loan is a public debt and Court cannot allow legal engineering to defeat the recovery of public debts. It was further observed that statute of limitation cannot be used as a tool for loan evasion.

6.8. In view of the aforesaid discussions, the objection of the defendants on limitation is rejected and it is held that the instant application is within limitation.

7. As regards defendants' allegation that the interest has not been charged at contractual rate, it is seen that defendants have not specified any specific interest entry which is not contractual. THEy have only contended that interest should be charged at 6% per annum. On the contrary, paragraphs XXII and XXIII of Page 19 of the Application and Annexures XXV and XXV(A) of the Application read with the affidavit pf the Bank filed on 29.10.2002 shows that the interest has been charged as per the Guidelines of Reserve Bank of India and Circulars issued from time-to-time. Needless to say that Banks are bound by RBI Circulars and Guidelines as because RBI directives have statutory favour under Banking Regulation Act, 1949. Accordingly, the rate of interest charged by the Bank till filing of the suit cannot be reopened even by the Court. However, considering the trend in decline in interest, pendente life and future interest has been charged at a reduced rate. THE various documents executed contain the contractual rate of interest. THE defendant borrowers have acknowledged the original loan and have accepted the interest rate along with terms and conditions on 9.5.1994 as will be seen from documents at Sl. No. 6. In respect of the-enhanced loan also the defendant borrowers have accepted the terms and conditions on 2.5.1995 as will appear from Sl. No. 19 at Para 4. Accordingly the objection has no leg to stand being not specific and as not based on documentary evidence.

8.1. Defendants have lastly contended that applicant Bank has obtained their signatures on blank printed and blank typed forms without explaining the nature of the documents. It is an undisputed fact that Banks lend money on the basis of securities and documentation by way of enforceable contracts. In the instant case defendants have admitted their signatures. It is their contention that they have signed on printed and blank forms. In business transactions involving enforceable contracts, a party cannot bonafidely contend at the eleventh hour that he was negligent and careless. Having availed the loan facility and by operating the account as per their convenience, defendants cannot question at this belated stage on the validity of various agreements. Defendants neither have raised objection at the time of signing nor immediately thereafter. That apart admittedly several title deeds have been deposited with the applicant Bank. It is alleged that Bank is withholding the same illegally. In case of illegal withhold of sale deeds it is not clear as to why objection and appropriate step was not taken against the Bank for such retention. On the contrary, defendants have further deposited more sale deeds subsequently to secure the loan enhancement. No objection was raised at the material time. It is further seen that separate sets of documents were executed for the original loan as well as for the enhanced loan at different point of time. Simply bald allegation/denial has been made without substan-tiating the same. When a person signs set of documents for both original and enhanced loan containing clear contractual terms, he is bound by it and if he disputes the binding nature of such document, it is for him to establish his contention. Applicant Bank has filed evidence on affidavit, certified copy of statement of accounts and as many as 36 documents in support of the loan transaction. THE loan application of the defendant and the sanction letter of the Bank are on record. Sl. No. 4 at Para 4 reveals that defendant Nos. 2 and 3 on behalf of defendant No. 1 acknowledged and accepted the terms and conditions of original loan on 29.4.1994. Sl. No. 19 will also reveal that defendants borrowers have acknowledged the enhanced loan and agreed with the terms and conditions. THE acknowledgement of sanction letter not only once but twice and operation of accounts by borrower gives abundant support to the case of the applicant Bank. Defendant's case on the contrary is simply based on their bald allegation/denial.

8.2. It is pertinent to refer here to page 15 of written argument of the applicant Bank filed on 26.6.2003. Admittedly, defendant No. 2, the partner of defendant No. 1 has filed a petition for time on 8.11.2002 stating inter alia that talk of compromise is in progress with the applicant Bank. Having enjoyed the fruit of huge debt mere allegation on the validity of contract/documents is not at all sufficient. Heavy onus lies on the defendants. Defendants have failed to establish their contentions.

9.1. As regards justification of claim of Bank it is seen that applicant Bank has produced evidence on affidavit of Shri Devehdra Kumar Singh, Manager and Shri Bidyut Banerjee, Senior Manager of the applicant Bank. THEy have confirmed that they are fully acquainted with the facts of the case and have proved on oath by way of affidavit, the pleadings and documents of the applicant Bank. It is seen that initially the applicant Bank has sanctioned Cash Credit Limit of Rs. 18.50 lacs and Overdraft facilities (Book debts) of Rs. 4.50 lacs totalling to Rs. 23 lacs vide sanction letter dated 26.4.1994. Documents at Sl. Nos. 1 to 3 at Para 4 are copy of the Partnership Deed, the loan application of defendants borrowers and the aforesaid sanction letter. THE defendants borrowers have acknowledged the debts and also accepted the interest rate and terms and conditions for the loan amount of Rs. 23 lacs as is seen from the documentation at Sl. Nos. 4 and 6. THE defendant Nos. 2 and 3 on behalf of the defendant No. 1 executed Demand Promissory Note, Hypothecation Agreement and Personal Guarantee, etc, for the aforesaid loan amount of Rs. 23 lacs (documents as at Sl. Nos. 5 and 7 to 12). Defendant Nos. 3 and 4 also created Equitable Mortgage on 6.5.1994 of their properties to secure the loan amount of Rs. 23 lacs as is seen from the documents as at Sl. Nos. 13 to 16. Subsequently, consequent to the application of the borrower, the loan was enhanced on 2.5.1995 as follows:


THE Application of the borrower and the sanction letter is at Sl. Nos. 17 and 18. For the enhanced limit of CC for Rs. 42 lacs and Overdraft for Rs. 10 lacs, borrowers executed Demand Promissory Note and hypothecation of good debts, etc. as appears at Sl. Nos. 20, 21, 22 and 24. THE borrowers also acknowledged and accepted the terms and conditions of the enhanced loan by way of documentation as at Sl. Nos. 19 and 21. Acknowledgement of enhanced debt by the defendants gives abundan support to the case of the applicant Bank.

9.2. In addition, the defendant Nos. 2, 3 and 4 executed guarantee agreement for the total enhanced loan amount of Rs. 77 lacs on 1.6.1995 as is evident from the document at Sl. Nos. 25 to 27. As surety the liability of the defendant Nos. 2, 3 and 4 becomes coextensive with that of principal debtor, making them jointly and severally liable for the aforesaid debt. THE defendants have also executed hypothecation agreement on 1.6.1995 for the total enhanced amount of Rs. 77 lacs (at Sl. No. 23). Sl. Nos. 28 and 29 will reveal that the earlier mortgaged properties, of defendant Nos. 3 and 4 were extended to secure the enhanced loan of Rs. 77 lacs includings interest and costs. Besides, defendant No. 2 also created mortgage of his properties to secure the enhanced limit of Rs. 77 lacs on 2.6.1995 as will appear from the documents at Sl. Nos. 30 to 33. THE defendants borrowers confirmed the balance on 3.7.1996 (at Sl. No. 34). From the aforesaid documentation and evidence, it is seen that the applicant Bank has established its claim.

9.3. That apart, the certified copy of Statement of Account, read with affidavit on evidence, reveals that up to 8.12.1998 Rs. 83,92,415/- is due from the defendants in CC A/c and Rs. 19,69,261/- is due in Overdraft A/c. THE total debts due from the defendants up to 8.12.1998 comes to Rs. 1,03,61,676/-. Being duly certified, signed and verified, the Statement of Account, which is kept by Bank in the due course of business, is clearly admissible in evidence. Defendants have not denied the utilization of the fund. It is seen that the applicant Bank by evidence has established the joint and several liability of all the defendants and it is established that as on 8.12.98 Rs. 1,03,61,676/- is due to the applicant Bank from the defendants.

10. However, it is noticed that with the present change in the economy and the policy of Reserve Bank of India the rate of interest is already on the decline. It is pertinent to refer to the case of S. Surendran v. Catholic Syrian Bank Ltd., III (2002) BC 22, DRAT Chennai, wherein relying on Hon'ble Apex Court judgment in Central Bank of India v. Rabindra Kumar's case and the case of N.M. Veerappa v. Canara Bank, II (1998) SLT361=AIR 1998 SC 1101, the Hon'ble DRAT awarded interest only @ 6% per annum. THE decline in rate of interest has also been considered by Hon'ble Supreme Court in the case of Kaushnuma Begum v. New India Assurance Co. Ltd., I (2001) SLT 30=1 (2001) ACC 151 (SC)=(2001) 2 SCC 9, and has awarded interest @ 9% in the facts of that case. Considering the trend in the decline in interest rate, I feel interest at the rate of 9% per annum from the date of suit till the date of realisation will be reasonable and will meet the ends of justice.


Hence, the Application of the applicant Bank is, hereby, accepted and allowed with cost against the defendants and it is hereby ordered that the applicant Bank is entitled to receive from defendants jointly and severally the loan and interest amounting to Rs. 1,03,61,676.00 paisa (Rupees One crore three lacs sixty one thousand six hundred and seventy six only) along with pendente lite and future interest @ 9% per annum till the realisation of the entire sum due and recoverable. Defendants are restrained from depleting, transferring, encumbering or in any way dealing with the mortgaged or hypothecated properties without paying the aforesaid adjudicated dues of the applicant Bank. Let a certificate of recovery be prepared in terms of provision contained in Section 19(22) of Recovery of Debts Due to Banks and Financial Institutions Act, 1993. Put up for seal and signature on 25.8.2003.

Judgment pronounced in the open Court on this the 24th day of July, 2003.

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