BANK OF MADURA LTD Vs. STATE OF TAMIL NADU

JUDGEMENT

(1.) THE applicant Bank, 'Bank of Madura Limited' is a Banking Company incorporated under the Indian Companies Act, having its Registered Office at Madurai and one of its branches amongst other places at 758, Anna Salai, Chennai 600 002, represented by its General Manager. THE applicant Bank filed a suit in C.S. No. 1783/1993 on the file of High Court, Chennai. Since the claim exceeds Rs. 10,00,000/-, the above suit was transferred to this Tribunal and renumbered as TA No. 136/ 1998. In this TA, the applicant Bank claims for a recovery of Rs. 1,58,92,305.15 p. against D1 to D3 jointly and severally together with subsequent interest at the contractual rate of 11% per annum with quarterly rests, on the said sum together with interest tax @ 3% from the date of presentation of the plaint till the date of realisation. THE applicant Bank also prays for any other relief(s) which are necessary for rendering justice.

(2.) The brief facts raising to this T.A. are that in the year 1967, Sri Saradha Mills Ltd., Pothanur, Coimbatore District requested the applicant Bank to advance to a loan of Rs. 15.00 lakhs stating that the Government of Tamil Nadu had offered to guarantee repayment of the loan to the applicant Bank. The Government of Tamil Nadu initially offered to guarantee the loan to the extent of Rs. 4,80,000/- and subsequently issued a Government Order in G.O.Ms. 741 (Industries) Ex. A2) dated 24.2.68 guaranteeing the loan to the tune of Rs. 15.00 lakhs, for which the Government executed a guarantee deed (Ex. A1). Pursuant to the same, Sri Saradha Mills Limited availed the loan to the tune of Rs. 15.00 lakhs and executed Promissory Note, Hypothecation Agreement in respect of movables (Ex. A3) and also deposited Title Deeds (Ex. A4) belonging to the Mills by way of equitable mortgage. As a Principal Borrower, Sri Saradha Mills Limited was not in a position to repay the loan instalments as agreed, hence the applicant Bank demanded payment from the Government in terms of the deed of guarantee. In the meantime, the principal borrower, Sri Saradha Mills Limited declared as sick and initially taken over by the Tamil Nadu Textile Corporation and subsequently by National Textile Corporation as per Acquisition Act. As the Banks claim related to pre-take over liability, the Commissioner of Payments could not make any payment on account of paucity of funds. The Chairman of the applicant Bank sent a Registered Letter (Ex. A5) and also issued a Lawyer's Notice (Ex. A6) demanding payment to the Government. As no payment was made, the Bank filed a suit in OS No. 255.76 in the Sub-Court, Coimbatore against the respondents for recovery of the amounts due. The same was withdrawn later on due to the Government assurance to repay the amount due under the guarantee together with 50% of suit cost. Since the Government did not pay the amount, the applicant Bank filed a writ petition W.P. No. 716/81 in the High Court of Madras (Ex. A7) and the same was allowed. Against this, the respondents preferred an appeal in W.A. No. 2228/87 before the Division Bench of the High Court and the same was dismissed by the Division Bench on 3.8.89 (Ex. A8). Thereafter, the D2 wrote a letter (Ex. A10) to the applicant Bank to furnish the details of the loan availed, repayment made, etc. by Sri Saradha Mills Limited. The same was furnished by the applicant Bank (Ex. A11) on 7.10.89 to the D2. The D2 disputed the calculation of interest at compounded rate and paid only a sum of Rs. 46,56,874/- under receipt dated 2.1.89 (Ex. A12). Though the applicant Bank received the amount with protest, the same was communicated on 7.11.89 (Ex. A13) to the D2. Even according to the calculation made by the Government, a sum of Rs. 1.22 lakhs was omitted and the same was acknowledged by the defendant under G.O.Ms. No. 122 Handlooms, Handicrafts and Textiles Department dated 30.3.90 (Ex. A14). The said sum of Rs. 1.22 lakhs was paid by the defendants under receipt dated 16.10.90 (Ex. A17). The correspondence between the applicant Bank and the Government (Ex. A16) and to the D2 are also placed (Ex. A16). After receipt of the Rs. 1.22 lakhs, the applicant Bank wrote another letter dated 21.11.90 to the defendants to pay the balance amount. As there was no response, the applicant Bank issued a notice to the defendants (Ex. A19) on 18.8.93. On receipt of the said notice, the Under Secretary to the Government of Tamil Nadu vide letter dated 24.8.93 (received by the plaintiff Advocate) stated that the notice was circulated to D3 for being dealt with. As the D3 failed to comply the same, hence this suit was filed. The main defence of the defendants is that the liability of the State Government under the guarantee would arise only after exhausting the other remedies by the Bank and when these become futile. The said contention has been negatived by the Hon'ble High Court of Madras in W.P. No. 761/1981, W.A. No. 228 of 1987. The further contention of the applicant Bank is that the total claim of Rs. 1,58,92,305.15 p. is still due after giving due deductions to the payment of Rs. 46,56,874/- and Rs. 1.22 lakhs received from the State Government (defendant), hence the applicant Bank is entitled to charge interest as per agreement. The applicant Bank further states that the defendant as guarantor, are liable to pay the suit amount as their liability is co-extensive. The suit was filed on 10.11.93 within 3 years from the date of last payment i. e. 16.11.90 made by the defendant, the State Government of Tamil Nadu, hence they prayed for issue of recovery certificate and any such orders for rendering justice.

(3.) IN counter, the applicant Bank further contended that State Government's this stand that the liability of the Government under the guarantee would arise only after exhausting all the remedies against the Principal Debtor is not tenable in the eye of law as it has already been negatived by the High Court of Madras in W.P. 716/81 and W.A. 2228/87. The applicant Bank further alleged that a sum of Rs. 1,58,92,305.15 p. is still due even after giving credit to the sum of Rs. 46,57,874/- and Rs. 1.22 lakhs paid by the State Government on 2.11.89 and 16.11.90 respectively. Further they alleged that though the defendants filed written statement, they were set as ex parte and their application for setting aside the said ex parte order was also dismissed by this Court on 9.8.01, therefore, there is absolutely no tenable defence is available for the defendants. Further, even after filing proof affidavit by the applicant Bank, there was no cross-examination from the defendants. They further alleged that the suit was filed on 10.11.93, which is well within the time limit of 3 years as the last payment by the defendant was made on 16.11.90. Hence, the applicant Bank prayed for issue of Recovery Certificate against the defendants with costs and subsequent interest as prayed for and to render justice.