Decided on February 07,1969



Vaidya, J. - (1.)The Plaintiff, Central Bank of India Ltd., has filed this appeal aggrieved by the Judgment and decree of the 3rd Addl. Judge, City Civil Court, Secunderabad in O. S. 42/63, The Plaintiff filed the suit against three deiendants 1st defendant being a partnership firm consisting of defendants 2 and 3 as partners. Defendant No. 3 is the son of the second defendant and the 4th defendant is the nephew of the second defendant. The Plaint averments are that defendants 2 and 3 who were doing business in Rice and Dhal Mills in the name of the 1st defendant, ret quested the plaintiff Bank in October, 1959 to give them key loan credit facilities to the extent of Rs. 75,000/ and opened an account in the name of tne 1st defendant. At the time of opening of the account, it was agreed that defendants 2 and 3 should pledge with possession castor seeds and other goods with the plaintiff to be kept in the godowns of the plaintiff under its lock and key. It was also agreed that on security of those goods the plaintiff should advance loans to defendants 2 and 3. On 5th October, 1959 defendant 2 and 3 executed; (1) A Pledge of Goods Agreement; (2) On Demand Promissory note for Rs. 75,000/- agreeing to pay interest at 2% over and above the Reserve Bank at Indi official rate with a minimum of 6% per annum with quarterly rests; (3) a form of declaration of partnership and (4) a letter of continuity, Later on with the consent of defendants 2 and 3 the rate of interest was increased with effect from 1st October, 1960, to 3 1/2 % over and above the Reserve Bank of India official rate with a minimum of 7 1/2 % per annum and defendants 2 and 3 agreed in writing to pay such increased rate of interest.
(2.)In accordance with the agreement of pledge, defendants 2 and 3 gave security of the goods representing that those were cast or seedd filled in bags and stocked in godown in Chandrayangutta. It was not possible or practicable for the plaintiff to examine each and every bag for its contents. On a test examination it was found that the bags contained castor seeds. The plaintiff believed the assurance and representations of the defendants that all the bags stocked in the godown contain castor seeds and on that basis advanced large sums of money to the defendants. Defendants 2 and 3 also used to give to the plaintiff signed declaration of pledged goods assuring that the bags in the godowns contained castor seeds. These declarations were accepted by the plaintiff as true and correct, In the beginning of January 1961 the plaintiff learnt that the defendants had committed fraud and instead of bags containing cast or seeds considerable number of bags were filled with ash and salt. According to the declaration of defendants- 2 and 3, there- should have been 1875 bags. of cast or seeds of the value of Rs. 93.750/-and on the assurance of which the plaintiff bad advanced to defendants 2 and 3 a sum of Rs. 56,192/- till 1-1-1961. When the stocks .were examined in January, 1961 it was found the there were only 616 bags containing castor seeds whose value was estimated at Rs. 29,000/- and the rest of the bags, contaiesd ash and salt.
(3.)After discovery of this fraud, the plaintiff wanted to take immediate legal action against defendants 2 and 3. At that juncture, the defendants approached the plaintiff to stay legal action offering to give security of the 4th defendant for the payment of the balance due to the plaintiff. The 4th defendant also agreed to stand surety; for defendants 2 and 3 He accordingly executed a surety bond on 9-1-1961 undertaking to pay the balance due by defendants 2 and 3 by instalment of Rs, 1000/- per month. It was also agreed that in case of default in payment of any single instalment, he would pay the entire balance due. By way of further security he transferred and assigned as pledge to the plaintiff two motor lorries viz., (1) one layland Comet bearing No. APT 1602 and (2) One Dodge bearing APT 4146. He also deposited with the plaintiff the title deeds of his land measuring about 2025 sq. yards situated in Chandrayangutta and created an equitable mortgage over it as further security for the payment oi the loan due by defendants 2 and 3.

Click here to view full judgement.
Copyright © Regent Computronics Pvt.Ltd.