Decided on November 29,2006



K.Gnanaprakasam, - (1.) THE respondent No. 1 Bank filed the Original Application for recovery of a sum of Rs. 38,98,133/- against the defendant Nos. 1 to 7, and for US $ 80,730/- against the defendant No. 8 together with interest @ 19.38% per annum, with quarterly rests and for cost and the same was decreed on 29th July, 2005. Aggrieved by the same, the defendant Nos. 1 to 6 have preferred this appeal.
(2.) Brief facts are as follows: The defendant No. 1 in the Original Application is a partnership firm and the defendant No. 3 is the managing partner and defendant Nos. 2,4 to 6 are the other partners. The firm is engaged in the manufacture and export of ready made garments. The defendant No. 3 representing the defendant No. 1 firm and the defendant Nos. 2 and 4 to 6 had the benefit of working capital to carry on business to the limit of Rs. 25 lacs. This facility was secured by hypothecation of raw materials, works in progress and finished goods, relating to textile garments meant for export. That in August, 1996, the defendant No. 1 firm requested the Bank for sanction of credit facility for discounting of export bills and the Bank also sanctioned Rs. 15 lacs for which the defendant No. 1 had executed a letter of indemnity through its managing partner the defendant No. 3. These credit facilities were collaterally secured by the personal guarantee of the defendant No. 7 to the extent of Rs. 80 lacs and also executed a guarantee agreement dated 17th August, 1996, and has also created equitable mortgage of his property on 29th December, 1995 by deposit of title deeds dated 30th December, 1995. Four bills of exchange were drawn on 60 days D/A (delivery of documents against acceptance) and the said bills were discounted by the Bank on 26th March, 1997 by earmarking the excess liability over the foreign bills discounting limit of Rs. 16 lacs and the banking credit of Rs. 25 lacs. The export bills were taken out by the Bank and they were forwarded to Emirates Bank International, Dubai, for onward presentation to the drawee, viz., the defendant No. 8, for acceptance and payment on the maturity date. The bills were duly accepted by the defendant No. 8 to mature for payment on 20th May, 1997. But despite repeated presentation by the Emirates Bank International, Dubai, the defendant No. 8 did not honour its commitment to pay the bills. There was no procedure for protesting for non-payment in the United Arab Emirates. But however, the Bank has got the bills protested for non-payment by sending a legal notice dated 10th August, 1998. The Bank prevailed upon the defendant Nos. 1 to 7 to repay the advance taken by discounting the bills, which were not paid and ultimately returned unpaid. Hence, the Bank filed the Original Application. The defendant Nos. 1 to 6 have filed a common written statement denying their liability of the claim made by the Bank. It is their case that as a condition to sanction the credit facilities, the Bank had obtained signatures from these defendants in a number of printed blank forms, blank letter head papers, typed papers and blank papers without even filling it up and these defendants were neither given the copies of those forms nor did they make aware of the contents of those documents. Such documents have been subsequently filled up and used by the Bank. There are material alterations and additions in the agreements, which have not been sufficiently stamped, nor properly signed on behalf of the appellant, nor duly attested by the witnesses, as required under law. The claim of the Bank is barred by time. The defendants also denied the execution of the hypothecation agreement, guarantee agreement etc. on the dates as given in those documents. The Bank has not given the break-up figures of the claim. The defendants also dispute the correctness of the claim of the Bank. The Bank is not entitled to claim interest with quarterly rests as there is no such specific agreement. The defendants also denied the authorisation of the defendant No. 3 in executing the loan documents on behalf of the defendant Nos. 1, 2, 4 to 6. The bills discounting facility was completely different from that of packing credit facility and temporary overdraft current account and they cannot be clubbed together, but the Bank has done so, and the same is not maintainable. The defendant Nos. 1 to 6 state that the Original Application is not maintainable either in law or on facts.
(3.) THOUGH the defendant No. 7 filed a separate written statement, he has not chosen to file appeal. The Tribunal had taken into consideration the respective aspects of the case and came to the conclusion that the respondent No. 1 Bank is entitled to proceed against the defendant Nos. 1 to7fortheamountclaimedin the Original Application and also decreed the Original Application. Hence, this appeal. I have heard the learned Advocates for the appellants and the respondent No. 1.;

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