- (1.) THIS appeal under Section 96 of the C. P. C. has been filed by the appellant against the judgment and decree passed by the Civil Judge, Nainital on 15-05-1995 in Original Suit No. 40 of 1992, whereby the suit was dismissed with costs and all securities/equitable mort gages of immovable properties were re leased from encumbrances. The Truck No. UGP7 4671 was also released to stand as security.
(2.) BRIEF facts of the case are that the appellant/plaintiff is a body corpo rate constituted under the Banking Com panies (Acquisition and Transfer of Un dertakings) Act No. 5 of 1970. Its Head Office is situated at Mandvi, Baroda in the State of Gujarat and Branch Office at Kashipur, District Nainital. Respond ent No. 1 - M/s Nainital Seeds Corpora tion is a partnership firm dong in pro duction and marketing of certified qual ity of seeds after purchasing raw seeds from the seed growers approved by re spondent No. 1. Respondent No. 1 through respondents/ defendants No. 2 and 3 approached to the appellant/plain tiff- Bank at Branch, Kashipur, District. Nainital for grant of financial assistance of Rs. 32,00,000/- by way of a cash credit (hypothecation) limit and Rs. 8,50,000/- as term loan for purchase of machinery and other movables. The appellant/plaintiff -bank sanctioned the aforesaid loan on terms and conditions. The respondents No. 2 and 3 for and on behalf of respondent No. 1 and respond ent No. 4 and father of respondents No. 7 and 8, Sri Raja Ram were the gran tors of respondent No. 1 which was ex ecuted and delivered in favour of the appellant/plaintiff- Bank on 06-04-1989 at Branch Kashipur, District Nainital. The following security documents in consideration of the aforesaid credit fa cilities were extended to respondent No. 1 : ' a) One promissory note worth Rs. 32,00,000/- and one promissory note worth Rs. 8,50,000/- dated 06- 04-1989 carrying minimum interest @ 15. 50% and 12. 50% respectively. b) Two letters of partnership dated -6-04-1989. c) Letter of continuing security dated 06-04-1989. d) Two-draft letter of undertaking dated 06-04-1989. e) Undertaking dated 06-04-1989. f) Instrument of Hypothecation of goods dated 06-04-1989. g) Two agreements of Hypothecation of moveable ma chinery dated 06-04-1989. h) Letters of instalment with accel eration clause dated 06-04-1989. i) Refinance Agreement 'a' -dated 06-04-1989. j) Two general form of Guarantee dated 06-04-1989 for Rs. 32,00,000/- and Rs. 8,50,0007 -executed by respondent/defend ant No. 4 and Late Sri Raja Ram. A cash credit (Hypothecation) account and term loan account were opened in the name of respondent/de fendant No. 1 in the ordinary books of accounts of the appellant/plaintiff. Cash credit facility were increased to Rs. 40,00,000/- by the appellant on the request made by respondents No. 1 to 3. In consideration of the aforesaid credit facility defendants No. 1 to 4 and late Raja Ram executed and delivered to the appellant on 02-08-1989 the security documents. Term Loan of Rs. 8,50,000/ - was to be repaid by respondents No. 1 to 3 in quarterly installments of Rs. 42,500/- in favour of the appellant. In this connection respondents No. 2 and 5 mortgaged a residential house known as 'ambika Bhawan' on 1/-01-1990 in favour of the Bank as additional secu rity by depositing its title deed i. e. a sale-deed dated 26-09-1987. On 14-06-1990, respondent No. 4 sold the prop erty to respondent No. 7 without prior permission and knowledge of the appel lant/bank. The guarantor-Raja Ram has expired and the respondents No. 3,7 and 8 are sons, heirs and legal representa tives of the deceased. Therefore, the respondents No. 3,7 and 8 are bound by the personal guarantee given by Late Sri Raja Ram to the appellant/bank oh 06-04-1989. The respondents No. 1 to 3 closed their business without paying the dues of the appellant/bank. Hence, the appellant/bank gave a final notice of de mand to all the respondents on 14-03-1992. Thereafter, the appellant/bank had initiated recovery against the re spondents of Rs. 55,95,270. 54 along with pendentelite and future interest. The appellant/bank also filed additional claim for declaration to this effect that sale deed dated 14-06-1990 executed by respondent No. 4 in favour of respond ent No. 7 is void, illegal and not bind ing upon the appellant/ plaintiff, done with an intent to fraud the creditors. In support of their case respond ents No. 1,2, 5 and 6 filed their joint written statement. It is alleged by an swering respondents that respondent No. 2 in order to secure the stocks, requested the appellant/bank to convert the cash credit (Hypothecation) limit into cash credit pledge limit so that the stock could be kept under the lock and key of the appellant/bank. But the appellant/ bank, instead of converting the hypothecation limit into pledge limit, locked up and sealed the entire factory premises along with the goods lying therein on 16-06-1990. Bank did not make any inventory of the goods and machinery lying in the premises. Prior notice/ intimation was not given. The bank without prior publication and in formation to the answering respondents, started selling of goods, the proceeds of which have not been credited in the loan accounts. The plaintiff bank has dis posed of all the seeds stock worth more than Rs. 45 lacs lying in the premises. The Bank has not credited the amount of sale of seed stock sold by it in the account of the loan during the period from 16-6-90 to 30-8-90, as such no dues are recoverable by the Bank as the loan amount has been adjusted by the Bank. It has also been alleged that the plaintiff did not take steps for restrain ing the defendant No. 4 from disposing of the mortgaged property even after get ting the previous information given by answering defendants. Thus the plaintiff has lost a valuable security due to its negligence and inaction. The plaintiff Bank has charged excessive interest in the loan accounts which are against the direction of Reserve Bank of India. It was also pleaded that the equitable mortgage is permissible within the speci fied area. Any document of mortgage property even after getting the previous information given by answering defend ants. Thus the plaintiff has lost valuable security due to its negligence and inac tion. The plaintiff Bank has charged excessive interest in the loan accounts which are against the direction of Re serve Bank of India. It was also pleaded that the equitable mortgage is permissi ble within the specified area. Any document of mortgage is necessary to be registered under the provisions of Trans fer of Property Act and Indian Registra tion Act. In the present case the docu ment has not alleged to have been reg istered as such in view of Section 49 of the Registration Act and other provisions of the T. P Act. The plea of Mortgage is not tenable and it will not effect the properties comprised therein. The de fendants also alleged that the Bank granted the defendant Rs. 32 lacs in stead of Rs. 40 lacks in cash credit (hypothecation) limit and Rs. 8. 50 Lacs instead of Rs. 10 Lacs in term loan even after much objections and protest by the defendants. However, the limit was in creased after a lapse of considerable pe riod. The defendants were therefore in short of funds and could not conduct their business properly and the plaintiff is solely responsible for not fulfilling its promises and objections thereby causing loss to the defendants. Plea of limitation has also been taken by the defendants.
(3.) THE defendant Nos. 3 and 4 also filed their joint written statement. THEy had alleged that plaintiff Bank had taken over the possession of the unit in collusion with defendant No. 2 and had caused great loss to them. THE answer ing defendants also lodged a F. I. R. on 28/31-/-90 at RS. Kashipur. THE part nership firm had been dissolved on 30-8-90. THEy claimed exemption from li ability on the ground that plaintiff had sold the stock goods and sale proceeds should be adjusted and credited in their loan accounts. The defendant Nos. 7 and 8 filed joint W. S. They denied the fact of guar antee given by their father late Raja Ram to plaintiff Bank.;