HEGDE - (1.) , J.: The 4th defendant in Original Suit No. 200 of 1954 in the court of Subordinate Judge, Vijayawada is the appellant in this appeal by special leave. That was a suit instituted by the Andhra Bank Ltd., the contesting respondent in this appeal. The suit was to recover the loans advanced to the Godavari Sugars, Refiners Ltd., defendant No. 5 in the suit. The suit was decreed against all the defendants and that decree was affirmed by the High Court in appeal. The decree against the other defendants has become final. The only question that arises for decision in this appeal is whether the decree against the appellant is sustainable. The High Court rested the decree against the appellant only on the basis of Ex. A-6 a letter given by defendants 1, 4 and another to the Masulipatam branch of the plaintiff bank while depositing Exhs. A-7 and A-8. In order to decide the correctness of the decree it is necessary to refer to the material facts as found by the trial court and the High Court and which are no more in dispute.
(2.) DEFENDANTS 1 to 3 were the partners of a company known as Aid Co. Ltd. (defendant No. 6). That company was the managing agents of defendant No. 5, the Godavari Sugars Refiners Ltd. which will hereinafter be referred as Godavari Sugars. The first defendant was the Managing Director of the Aid Co. Ltd. On 29/01/1952, the first defendant made an application on behalf of Godavari Sugars to the Andhra Bank Ltd. (which will hereinafter be referred to as the 'Bank') for a loan of three to four lakhs of rupees under the key loan and cash credit account and on the guarantee and co-obligation of defendants 1 to 3 in their personal capacity also. The Managing Director and the General Manager recommended that application to the Board of Directors upto a limit of Rs, 1,25,000/-. Before the sanction of the Board of Directors was obtained, the first defendant requested the Managing Director to sanction Rs. 50,000.00 tentatively as there was urgent need. The Managing Director sanctioned a sum of Rs. 50,000.00 in anticipation of the loan to be granted in pursuance of the application (Ex. A-3) made by the first defendant on Ja 29/01/1952. The Managing Director authorised the agent of Bhimavaram branch to obtain the necessary documents signed by defendants 1 to 3 in their personal capacity as well as the first defendant as the Managing Director of the managing agents and on behalf of Godavari Sugars. A pronote and the cash credit agreement relating to that loan were handed over to the agent of Bhimavaram branch on 14/04/1952 after the same were executed by defendants 1 to 3. Thereafter defendant 1 drew from the Bhimavaram branch Rs. 20,100.00 on 25/04/1952 and Rs. 9,000.00 on 26/04/1952. But he deposited a sum of Rs. 8,100/. on 25/04/1952, Thus a sum of Rupees 21,000/- was due to the bank under the loan in question on 26/04/1952. On that date the Board of Directors sanctioned the loan asked for under Ex. A-3 upto a limit of Rs. 1,25,000.00. Sometime thereafter the authorities of the Bank learnt that on a creditor's winding up petition a provisional liquidator for the Godavari Sugars had been appointed by the High Court of Madras without objection from defendants 1 to 3/04/1952. That fact had not been brought to the notice of the Bank authorities by defendants 1 to 3 when the advances were made on the 25th and 26th of April 1952. After coming to know of that fact, the Manager and the Managing Director of the Bank pressed defendants 1 to 3 to repay the amount drawn. But they were advised by Satyanarain Chowdary, the father-in-law of the first defendant (2nd defendant is the wife of the first defendant and the third defendant his mother in-law) to plead before the High Court that the Bank was a pledgee of the articles pledged for the keyloan and as such had a lien over the pledged goods in respect of the advances made. The Bank accordingly moved the High Court claiming a lien over the goods pledged but that claim was rejected by the High Court. In connection with the proceedings before the High Court the Bank incurred an expenditure of Rs. 1548/10/6. The claim against defendants 1 to 3 is based on the above facts. That claim has been decreed as mentioned earlier. The decree to that extent has become final. Now coming to the claim against the appellant which is the only claim material for our present purpose, the facts disclosing the cause of action against him as set out in the plaint paragraph 9 are as follows: '" The defendants 1 and 4 requested the plaintiff-bank to refrain from taking legal action at that time (after the bank's claim was rejected by the High Court) and give them time. For all sums due till then and owing thereafter on any account by the defendants 1 and 4 either individually or jointly with others, two title deeds (Exhs. A-7 and A-8) were deposited with the bank on 15-1-1953 at Masulipatam thereby creating equitable mortgage over the properties comprised therein and situated within the jurisdiction of this Honourable Court. In consideration of the above deposit, the plaintiff-bank refrained taking legal proceedings against the defendants 1 to 3 for the amount due and loss occurred to the plaintiff-bank and an overdraft account was also sanctioned to the defendants 1 and 4. Thus the plaintiff-bank has got security over the properties shown in the schedule covered by the two title deeds deposited with the plaintiff-bank on 15-1-l953 at Masulipatam for the suit debt, the particulars of which are detailed hereunder". According to the plaint a mortgage by deposit of title deeds was created in pursuance of the contract set out above. In this appeal we are only concerned with the truth of that contract. The appellant denied the allegations contained in para 9 of the plaint. According to him he had nothing to do with the suit transactions and that he never requested the Bank to refrain from taking legal action against defendants 1 to 3. He went further and averred in his written statement that he did not know anything about the suit transactions till the Bank refused to return to him Exhs A-7 and A-8. Dealing with the deposit of Exhs. A-7 and A-8, he averred that those documents were deposited to create an equitable mortgage to secure an overdraft loan of Rs. 25,000.00 borrowed by him and that deposit has nothing to do with the suit transactions.
(3.) THE only question for decision is whether Exhs. A-7 and A-8 were deposited to secure the suit debts. In order to decide that question it is necessary to set out a few more facts. Defendant 1 and the appellant are divided brothers. THE first defendant was having his business in Madras. THE appellant was haying his business at Masulipatam. Madras and Masulipatam are quite far off from one another. Both the appellant and defendant No. 1 appear to have had separate dealings with the Bank even prior to the suit transactions. We have earlier referred to the loan application Exh. A-3 made by the first defendant and the advances made. From the pronote as well as the cash credit agreement referred to earlier, it appears that the loan was made on the security of the goods belonging to Godavari Sugars as well as on the personal security of defendants 1 to 3. That is also the basis on which the Board of directors of the Bank sanctioned the loan: see Exh- A-17. Neither in Exh. A-3 nor in Exh A-71 nor in any of the correspondence that passed between the Bank and defendant No. 1, there is any reference to the fact of appellant's either standing as a surety for the loans advanced to the Godavari Sugars or his having given his property as security for that loan. It is also admitted that in the books of account kept by the Bank, the equitable mortgage created by the deposit of Exhs. A-7 and A-8 is not shown as a security for the advances mentioned in the plaint. THEre is neither documentary evidence nor reliable oral evidence to support the averments in para 9 of the plaint. In none of the correspondence that passed between the Bank and defendant No. 1 or that passed between the Bank and the appellant, there is any mention of the fact that at the instance of the appellant, the Bank had refrained from taking action against defendants 1 to 3. Nor is there any mention in them that because of the deposit of A-7 and A-8 along with the memorandum Ex. A-6 the Bank refrained from taking action against defendants 1 to 3. Neither the Manager nor the Managing Director of the Bank who have been examined in support of the Bank's claim spoke to the fact that they refrained from taking action against defendants 1 to 3 at the instance of the appellant or that they refrained from taking action against them because of the equitable mortgage referred to earlier. Three witnesses namely P. Ws. 1 to 3 were examined in supported of the plaintiffs case. Neither Prosecution witness 1 nor Prosecution witness 2 speaks to the circumstances under which Ex A-6 came to be executed- Prosecution witness 3, the Managing Director of the Bank deposed in his Chief Examination as follows: "D-4 applied for a loan as per Ex. A-67. He met me in that connection. D-I also met me in that connection. D-4 represented that D-1 had commitments in regard to Godavari Sugars, that he and D-1 wanted monies requested me to get Ex A-67 be sanctioned representing that they would deposit title deeds that would be additional security to safeguard the interest of the bank. I told him that the loan of Rs. 50,000.00 could be sanctioned if he agreed to pay outright the amount due from D-1. D-4 represented that might prejudice our claim before the High Court as pledge and that there would be deposit of title deeds he made a request ultimately to sanction at least Rs. 25,000.00. D-1 also represented that title deeds would be deposited and requested that the loan might be granted. Under Ex. A-67 loan of Rs. 25,000.00 was granted. D-1 and D-2 gave title deeds as security for it. We did not take criminal action on the assurances given by them." ;