CENTRAL BANK OF INDIA LTD Vs. MYADAM YELLAIAH GUPTA
HIGH COURT OF ANDHRA PRADESH
CENTRAL BANK OF INDIA, LTD.
MYADAM YELLAIAH GUPTA
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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.
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