A.Vijay Kumar, -
(1.) THIS application has been filed against the defendants for recovery of a sum of Rs. 7,51,30,174/- together with future interest @ 22% per annum with monthly rests from the date of application till realisation and for sale of Schedule 'B' mentioned properties of the application.
(2.) The brief facts of the case are as follows:
i. The defendant No.1 (D 1) is a company with three Directors; Mr. Ahmed Basha, Mrs. Shamshad Begum and his nephew, Ameen Sayed. Mr. Ahmed Basha is no more. According to the applicant bank, the sole legal representatives of Mr. Ahmed Basha are Shamshad Begum and Ameen Sayed, who have undertaken liability for all his debts and obligations.
ii. The defendant No.1 was enjoying ad hoc credit facilities with the applicant bank in 1997 upon the security of the immovable properties more fully described in Schedule 'B' of the application. These were secured by a guarantee given by the other defendants arrayed in the application. Defendants had deposited title deeds relating to B Schedule properties with the bank on 4th March, 1997 so as to create an equitable mortgage under Section 58(f) of the Transfer of Property Act, 1882 towards continuing security for the liabilities of the defendant No.1. The deposit of title deeds was confirmed by the defendants vide letter dated 7th March, 1997. Thus an equitable mortgage came into being on 4th March, 1997 with respect to the Schedule 'B' properties.
iii. On 9th October, 1997, defendants approached the applicant bank with a specific request for facilities, in order to procure raw materials and stocks of leather, and for export and import purposes. The defendants sought the following limits:
Towards continuing collateral security for the loan granted to defendant No.1, the defendant Nos. 2 and 3 had deposited the title deeds relating to immovable properties set out in Schedule 'B' of the application with the applicant bank, with intent to create security. The deposit of title deeds was made on 9th October, 1997 and confirmed by their letter dated 13th October, 1997. The following documents were executed by defendants in respect of the packing credit and letter of credit facilities;
d. Demand promissory note dated 9th October, 1997 for Rs. 200 lacs (defendant No.1)
e. Packing credit agreement dated 9th October, 1997 (defendant No.1)
f. Indemnity letter dated 9th October, 1997 (defendant No.1)
g. Demand promissory note dated 9th October, 1997 for Rs. 150 lacs (defendant No.1)
h. Counter guarantee dated 9th October, 1997 (defendant No.1)
i. Personal guarantee dated 9th October, 1997 (Mr. N. Ahmed Basha)
j. Personal guarantee dated 9th October, 1997 (defendant No.2)
k. Personal guarantee dated 9th October, 1997 (defendant No.3)
l. Personal guarantee dated 9th October, 1997 (defendant No.4)
m. Corporate guarantee dated 9th October, 1997 (defendant No.5)
It is further sated by the applicant bank that, so far as the properties mortgaged on 4th March, 1997 were concerned, the details of documents deposited in order to create various equitable mortgages, is set out in the index of documents filed alongwith the Original Application and copies of relevant documents are also produced in the paper book.
It is further stated in the application that, even though the defendant No.1 fully utilized and enjoyed the facilities, the accounts were not at all maintained in a regular fashion. Defendant No.1 wrote to the applicant bank on 23rd November, 1999 promising to effect shipments of Rs. 34 lacs by the end of 1999 and promising to pay Rs. 15 lacs by the end of the year. However, the payments were not made as assured. Applicant bank issued a legal demand notice to the defendants on 20th June, 2001 which was duly received by all defendants but the defendants did not care to reply or to make any repayments.
As on 31st March, 2002, the dues of the defendant No.1 under the various facilities are as under:
It is further stated in the application that this sum carries further interest @ 22% per annum with monthly rests, including penal interest of 2% per annum.
The defendant No.2 has filed a reply statement on his behalf as well as for other defendants denying the material averments made by the applicant bank. The defendants have also filed as set of documents to support their contention which contains various correspondence made to the applicant bank as well as by the defendant No.1. It is the case of the defendants that the title deeds which have been deposited on 4th March, 1997 in respect of the property mentioned in Schedule 'B' is only for the purpose of ad hoc credit facilities and not for the other facilities. It was also denied that only the property situated at Dr No. 55/ A, New Avadi Road, Kilpauk, Chennai 10 was offered as a collateral security to the ad hoc sanction limit and denied that all the properties mentioned in schedule 'E' has been given as a collateral security. Defendants have also, denied the execution of hypothecation of finished goods and also the stock of raw materials described in Schedule 'A'. It has also been denied that on 9th October, 1997, no sanction letter was issued and also denied the deposit of title deeds made on 9th October, 1997 and the confirmation of balance dated 13th October, 1997. It is also the averment of the defendants that when the company was in need, the bank did not enhance the credit facilities and thereby the foreign buyers backed out which amounts to a heavy loss. It is also the averment of the defendants that against the exports of a high value, they have drawn only lesser value. There is another contention that, because of the loss occurred in the business, the defendants executed a revival letter on 8th November, 1999 with a condition that subject to their appeal to be made for waiving the penal interest and compound interest etc., should be taken into consideration. It is also averred by defendants that the finished goods were under the custody of the applicant bank and did not release the same at the time of request by the defendants to execute the export orders. It is also averred that the total value of the stock lying in the godown under the custody of the applicant bank was to the value of Rs.5,53,73,557/-. It is also the version of the defendants that they had been sending the applicant bank workable proposals including revival of the business but the same was not considered by the applicant bank. It is the contention of the defendants that the goods which were under the custody of the applicant bank should have been sold in the year 1999 itself when the value of the same was worth about Rs. 5.5 crore and the applicant bank took action to sell the properties only after a lapse of three years. It is also the version of the defendants that the claim is barred by limitation. According to them, the facilities were granted on 9th October, 1997 whereas the present case was filed on the basis of the confirmation of the acknowledgement dated 8th November, 1999. Hence, there is no proper acknowledgement as the condition laid down in the confirmation has not been fulfilled and as such the claim is totally barred by limitation. In this respect, the attention of the Tribunal was drawn to Section 18 of the Limitation Act, 1963 which deals with the effect of acknowledgment in writing. It has also been the averment of the defendants that the acknowledgement of debt should have been obtained before the expiry of the Limitation which is not done in this case. Hence, the Original Application is liable to be dismissed on this account itself. There was further denial that the statement of accounts is not correct quoting certain entries dated 15t November, 2001. There was further denial that the insurance premium paid by the applicant bank and debited in the accounts of the defendants.
(3.) IN order to establish the case of the applicant bank, the manager of the applicant bank filed proof affidavit and exhibit Nos. Al to A34 were marked. By virtue of the orders passed in IA 447/04, necessary amendment in the schedule was also effected. Applicant bank filed additional proof affidavit and filed exhibit No. A 35 which was also taken on record with the consent of the defendants and marked.;