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Judgment
1.0 This application is filed by the applicant bank under Section 19(1) of Recovery of Debts and Bankruptcy Act, 1993 (formerly Recovery of Debts Due to Banks and Financial Institutions Act, 1993) for recovery of a sum of Rs.10,38,923/- against the defendants with further interest at 9.30% p.a. compounded half yearly rests under Finance against Warehouse Receipt Facility (Maize) A/c No.1061671100097699 and a sum of Rs.46,97,837/- against the defendants with further interest at 9.80% p.a. compounded half yearly rests under Finance against Warehouse Receipt Facility (Soya Bean) A/c No.1061671100117869 from the date of application till the date of realization in full and for sale of schedule mentioned property along with costs of this application.
2.0 Brief facts of the Application may be stated as follows.
2.1 It is stated that the 1st defendant approached the applicant bank for sanction of facility against delivery cum deposit of commodities (Maize) on 20.05.2016 and the applicant bank considering the said request sanctioned finance against warehouse receipt to the tune of Rs.20 lakhs on 20.05.2016 by way of Letter of Intent of Loan Account No.1061671100097699 for the purpose of offering liquidity support to the farmers for avoiding distress sale with floating rate of interest @9.45% p.a. compounded with monthly rests. It is stated that a sum of Rs.19,68,000/- was disbursed to the 1st defendant on 20.05.2016 against the Ware Housing Receipt dated 19.05.2016 repayable within a period of 12 months. It is stated that the primary security is pledge of endorsed Ware House Receipt with the bank and endorsement of bank lien on the register maintained by the 2nd defendant. It is stated that at the request of 1st defendant on 14.06.2017, the bank had accepted the request of the 1st defendant for releasing the commodities in proportion to the repayment made to the applicant bank. It is stated that, accordingly, the 1st defendant had made repayments of Rs.9,53,158/- over the period from 08.06.2017 to 10.07.2017 for proportionate release of commodities from the godown maintained by the 2nd defendant.
2.2 It is stated that the applicant bank entered into Master Agreement for Services with M/s Star Agri warehousing and Collateral Management Limited to act as service provider who shall act as an agent or representative of the bank at each of the storage area(s) within the territory and shall take necessary action to ensure the safety, security and proper upkeep and maintenance of any and all commodities with particular reference to kind, quality maintenance, quantity, grade and weigh the same as may be inherited to the nature of the commodities so stores, while the same are stored at the relevant storage area.
2.3 It is stated that Clause 12.1 stipulates that the service provider agrees that it shall indemnify the bank for any losses incurred to the bank due to any misrepresentation of facts in respect of the quality and quantity of the commodities including the ownership etc., pledged to the bank or due to the documents submitted to the bank having been forged or incomplete or any case of impersonation or disbursing loans and / or releasing stocks against forged documents that would have occurred during the course of complying with the said acts specified herein or any loss incurred due to the failure on the service provider's part in complying with any of the obligations under this agreement / or due to loss, if any suffered by the bank, due to the misdeeds whether intentional/unintentional, of the Service Provider Personnel. Service Provider further indemnify the bank against any loss, costs damages or expenses incurred or sustained by the bank on account of deficiency in the admissibility of any documents the execution of which has been overseen by the Service Provider. The service provider agrees to pay the bank all amounts demanded by the bank upon receipt of notice from the bank and that it shall accept the amount stated as reasonable estimate of the loss / damages incurred / suffered by the bank in connection therewith, Service Provider reserves its right to dispute against any unlawful or unproven monies so asked or demanded by the bank through the above notice against arbitrator as mentioned in Clause 19.2. of the agreement.
2.4 It is stated that the 1st defendant executed following documents in respect of Warehouse Receipt Facility for Rs.20 lakhs sanctioned on 20.05.2016:-
(i) Facility Agreement by 1st defendant for Rs.20,00,000/-
(ii) Demand Promissory Note for Rs.20 lakhs by 1st defendant.
(iii) Demand Promissory Note delivery letter by 1st defendant.
(iv) Undertaking signed by 1st defendant undertaking that no litigations pending against borrowers, other than those in the normal course of business
(v) Undertaking by 1st defendant undertaking that she shall not divert the facilities to inert-corporate deposits, debentures, stocks and shares, real estate business etc.
(vi) Authorisation Letter by 1st defendant
(vii) PDC declaration signed by 1st defendant
(viii) Delivery cum Confirmation Letter signed by 1st defendant for Rs.20 lakhs confirming that having deposited with and bailed to the bank the produce / goods at the warehouse / godown at Muthulakhmi's godown at No.4/128, Sivasankarapuram, Thalaivasal, Athur, Salem and further confirmed that the 1st defendant is the absolute owner of the said goods and the goods are free from any charge and that the 1st defendant has not availed any loan or facility from any banks / financial institutions against the said goods.
2.5 It is stated that the 1st defendant defaulted in repayment and the same accumulated to Rs.10,38,923/- under Loan Account No.1061671100097699 as on 13.09.2017. It is stated that the 1st defendant failed to respondent to the reminders, personal contacts and repeated demands made by the applicant bank. It is stated that the defendant is also liable to pay 2% additional interest chargeable for default in repayments till the date of realization along with costs.
2.6 It is stated that the applicant bank sent a recall notice to the defendant on 01.06.2017 and the same was duly acknowledged by the defendant. It is stated that a public auction notice dated 17.8.2017 was published in English and Tamil newspapers having circulation in the region scheduling the auction on 23.08.2017 for sale of Maize. It is stated that pursuant to the said notice, 1st defendant filed W.P. No.22402 of 2017 before the Hon'ble High Court and the same is pending disposal. It is also stated that the 1st defendant had issued a cheque for Rs.9,34,332 towards repayment of the financial facility, however, the same was dishonoured and the applicant bank has filed a complaint against the 1st defendant under Section 138 of the Negotiable Instruments Act in CC No.90 of 2017 before the Fast Track Court , Kallakurichi and the same is pending disposal.
2.7 It is stated that the 1st defendant approached the applicant bank for sanction of facility against delivery cum deposit of commodities (Soya Bean Doc) on 25.01.2017and the applicant bank considering the said request sanctioned finance against warehouse receipt to the tune of Rs.100 lakhs on 08.02.2017 by way of Letter of Intent of Loan Account No.1061671100117869 for the purpose of offering liquidity support to the farmers for avoiding distress sale with floating rate of interest @9.80% p.a. compounded with monthly rests. It is stated that a sum of Rs.21,97,650/- on 21.02.2017 and Rs.29,30,200/- on 04.03.2017 was disbursed to the 1st defendant against the Ware Housing Receipt dated 21.02.2017 and 03.03.2017 respectively repayable within a period of 12 months. It is stated that the primary security is pledge of endorsed Ware House Receipt with the bank and endorsement of bank lien on the register maintained by the 2nd defendant.
2.8 It is stated that the applicant bank entered into Master Agreement for Services with M/s Star Agriwarehousing and Collateral Management Limited to act as service provider who shall act as an agent or representative of the bank at each of the storage area(s) within the territory and shall take necessary action to ensure the safety, security and proper upkeep and maintenance of any and all commodities with particular reference to kind, quality maintenance, quantity, grade and weigh the same as may be inherited to the nature of the commodities so stores, while the same are stored at the relevant storage area.
2.9 It is stated that Clause 12.1 stipulates that the service provider agrees that it shall indemnify the bank for any losses incurred to the bank due to any misrepresentation of facts in respect of the quality and quantity of the commodities including the ownership etc., pledged to the bank or due to the documents submitted to the bank having been forged or incomplete or any case of impersonation or disbursing loans and / or releasing stocks against forged documents that would have occurred during the course of complying with the said acts specified herein or any loss incurred due to the failure on the service provider's part in complying with any of the obligations under this agreement / or due to loss, if any suffered by the bank, due to the misdeeds whether intentional/unintentional, of the Service Provider Personnel. Service Provider further indemnify the bank against any loss, costs damages or expenses incurred or sustained by the bank on account of deficiency in the admissibility of any documents the execution of which has been overseen by the Service Provider. The service provider agrees to pay the bank all amounts demanded by the bank upon receipt of notice from the bank and that it shall accept the amount stated as reasonable estimate of the loss / damages incurred / suffered by the bank in connection therewith, Service Provider reserves its right to dispute against any unlawful or unproven monies so asked or demanded by the bank through the above notice against arbitrator as mentioned in Clause 19.2. of the agreement.
2.10 It is stated that the 1st defendant executed following documents in respect of Warehouse Receipt Facility for Rs.100 lakhs sanctioned on 20.02.2017:-
(i) Facility Agreement by 1st defendant for Rs.1,00,00,000/-
(ii) Demand Promissory Note for Rs.100 lakhs by 1st defendant.
(iii) Demand Promissory Note delivery letter by 1st defendant.
(iv) Undertaking signed by 1st defendant undertaking that no litigations pending against borrowers, other than those in the normal course of business
(v) Undertaking by 1st defendant undertaking that she shall not divert the facilities to inert-corporate deposits, debentures, stocks and shares, real estate business etc.
(vi) Authorisation Letter by 1st defendant
(vii) PDC declaration signed by 1st defendant
(viii) Delivery cum Confirmation Letter signed by 1st defendant for Rs.20 lakhs confirming that having deposited with and bailed to the bank the produce / goods at the warehouse / godown at Marimuthu's godown at No.1085, Ward-6, Nehru nagar, Siruvachur 636112. It is stated that an agreement of lease was entered into between the 1st defendant and Mr. Marimuthu for storing the commodities with the express consent of the 2nd defendant. It is sated that the 1st defendant confirmed that is the absolute owner of the said goods and the goods are free from any charge and that the 1st defendant has not availed any loan or facility from any banks / financial institutions against the said goods.
2.11 It is stated that the 1st defendant defaulted in repayment and the same accumulated to Rs.46,97,837/- under Loan Account No.1061671100117869 as on 28.10.2017. It is stated that the 1st defendant failed to respondent to the reminders, personal contacts and repeated demands made by the applicant bank. It is stated that the defendant is also liable to pay 2% additional interest chargeable for default in repayments till the date of realization along with costs.
2.12 It is stated that the applicant sent loan recall notice on 9.10.2017 and the same was acknowledged by the 1st defendant. As the 1st defendant did not come forward to regularize the account applicant bank classified the accounts as NPA on 17.8.2017 and sent a legal notice on 07.11.2017 and the same was received by the defendant.
2.13 It is stated that the 1st defendant had stolen the commodities from the godown owner by Mrs. Muthulakhmi which is being maintained by the service provider, the 2nd defendant herein and thereby the 1st defendant has committed fraud and criminal act. It is stated that the applicant bank was therefore constrained to lodge a police complaint on 13.11.2017 against defendants 1` and 2 and others with Superintendent of Police, Salem to recover the pledged commodities from the accused which is still pending investigation. Thus a sum of Rs.57,36,760/-is due and payable by the defendants to the applicant bank with applicable rate of interest from the date of filing of the OA till its realization.
3.0 The 1st defendant filed his reply statement. The averments therein, in brief, are as follows.
3.1 It is stated that the above OA is misconceived, premature, abuse of process of law and liable to be dismissed in limine. It is stated that the present application is liable to be dismissed on very many grounds and that the property mentioned in the application is purely agricultural produce and hence the applicant cannot seek any relief before this Tribunal by filing an application under Section 19(1) of the RDB Act.
3.2 It is stated that the 1st defendant has not executed any of the documents mentioned in the application. It is stated that after availing the loan the 1st defendant has been making regular repayments to the tune of Rs.18 lakhs and the 1st defendant is engaged in agriculture and his entire income is only from the agricultural activities. It is stated that in view of less rainfall the 1st defendant suffered huge loss in income and is not in a position to pay the balance dues to the applicant bank.
3.3 It is stated that the 1st defendant approached the applicant bank and sought time for repayment of the balance dues, however the applicant bank did not accept the same and initiated public auction proceedings against the schedule mentioned property and therefore the 1st defendant filed W.P. No.22402/2017 before Hon'ble High Court and the Hon'ble High Court was pleased to stay the public auction and the said writ petition is pending disposal. It is stated that after the same in order to take vengeance against the 1st defendant the applicant initiated a case under Section 138 of the Negotiable Instruments Act, before Fast Track Court, Kallakurichi and the same is also pending. It is stated the 1st defendant approached the Hon'ble High Court by filing Crl. O.P. No.24650 of 2017 and the same is pending disposal.
3.4 It is stated that it is false to say that the 1st defendant has stolen the commodities from the Godowns and it is also false to say that the investigation is pending before Superintendent of Police based on the complaint lodged by the applicant. It is stated that the 1st defendant has approached the Hon'ble High Court and has filed Crl. O.P. No.16541 of 2017 and the same was closed recording the submission of Inspect of Police.
3.5 It is stated that the present application is filed with false allegations and the same is not maintainable in law and the same is liable to be dismissed.
4.0 2nd defendant filed its reply statement. The averments in the reply statement are as follows.
4.1 It is stated that at the outset the defendant denies all the allegations and averments made in the OA by applicant bank seeking for recovery of a sum of Rs.57,36,760/- jointly and severally from the defendants 1 and 2 and put the applicant bank to strict proof of all the allegations and averments made therein. It is stated that the application is nothing but an abuse of process of law as being entirely baseless, illegal and devoid of merits and the claim as put forth is not tenable in law and on facts. It is stated that the applicant bank has suppressed all material facts, documents, relevant to the issues for consideration and has placed misleading facts.
4.2 It is stated that as could be seen from the prayer there is no specific relief sought for as against this defendant though arrayed as 2nd defendant in the OA. It is stated that there is no "debt" recoverable from this defendant which would fall within the meaning of "debt" under Section 2(g) of the RDB Act. It is stated that there is a mischief by the applicant bank in the manner in which the averments made in the OA, as in many places, the defendants are shown in singular "Defendant", while admittedly this defendant had not executed any document in favour of the applicant bank and is neither a borrower nor a guarantor, the debt sought to be recovered from the first defendant in the OA. It is stated that this defendant is not a proper and necessary party to the OA as such the claim against 2nd defendant is liable to be dismissed.
4.3 It is stated that this defendant is neither a borrower nor guarantor to the loan /credit facilities availed by the 1st defendant from the applicant bank. It is stated that the applicant bank has suppressed all material facts, documents relevant to the issues for consideration and has placed misleading facts and as such the OA as laid by the applicant bank as against the 2nd defendant is nothing but an abuse of process of law and the averments and allegations as put forth in the OA as against the 2nd defendant is not tenable in law and on facts.
4.4 It is stated that the 2nd defendant has not availed any loan and is not a beneficiary of the loans disbursed by the applicant bank for recovery of which, the present OA has been filed. It is stated that the 2nd defendant is not a guarantor for the said loans in question and submit that the applicant bank availed Warehouse Management Services as a service provider from the 2nd defendant in terms of an "Master Agreement for Services" entered into between them on 27.01.2015. It is stated that the relationship between the applicant bank and the 2nd defendant is governed by the terms and conditions of the said contract. It is stated that various categories of services and obligations arising thereto are provided under the contract and it is stated that the loan transaction between the applicant bank and the borrower and guarantor, being 1st defendant is purely a transaction entered into between the applicant bank and the 1st defendant and this defendant has no privity to the same.
4.5 It is stated that it is further evident from a perusal of the OA that the claim of the applicant is bank qua the 2nd defendant in so far as the loss of security is premised on and arising out of an alleged fraud perpetrated by the concerned borrower and the allegation against the 2nd defendant herein is that the commodities are being maintained by this defendant and caused loss to the applicant bank, which is not true and does not stand established in the pleadings or any documents relied upon. It is stated that it is worthwhile to mention herein that the 2nd defendant had submitted a criminal complaint in this regard.
4.6 It is stated that the 2nd defendant is neither a debtor/guarantor, nor necessary or proper party and as such cannot be impleaded as a defendant in the OA. It is stated that the agreement executed between bank and the 2nd defendant is independent to the loan transaction which creates a principal to principal relationship. It is stated that the said agreement contain an arbitration clause which states that the disputes or controversies arising out of the said agreements shall be resolved and settled by arbitration of the sole arbitrator and as such the present application is not maintainable against the 2nd defendant.
4.7 It is stated that the application against this defendant is entirely illegal, malicious, unsustainable and is beyond the jurisdiction vested in the Tribunal under Section 17(1) of the Recovery Act. It is stated that the present proceedings are not maintainable against the 2nd defendant and as such the OA against the 2nd defendant is liable to be dismissed in limine.
4.8 It is stated as stated above, there is no claim against the 2nd defendant and no relief is sought for and the 2nd defendant is neither a borrower nor a guarantor and they are not privy to the loan transaction. It is stated that the applicant has already arrayed the concerned borrower as defendant in the present OA, as such the applicant bank has no valid cause of action against the 2nd defendant before this Tribunal and the 2nd defendant has no role in the present proceedings.
4.9 It is stated that for these reasons, no valid and specific relief can be sought by the applicant against the 2nd defendant.
5.0 In the light of the above, the points that arise for consideration by this Tribunal are:
Whether the applicant bank has established its claim against the defendants? If so, for what amount?
Whether the applicant bank is entitled for pendent lite and future interest, if so, at what rate?
6.0 Point No.1
Whether the applicant bank has established its claim against the defendants? If so, for what amount?
6.1 Since the applicant bank had claimed recovery certificate for a sum of Rs.57,36,760/- with future interest at contractual rate against both the defendants, and as the 2nd defendant opposed the claim against the 2nd defendant, it is imperative for the applicant to establish its claim against both the defendants.
6.2 The applicant bank in its endeavor to establish its claim against the defendants examined its official as AW1 and got marked Exhibits Ex.A-1 to A-30. Ld. Counsel for Applicant Mr. Parthasarathy placing reliance on the proof affidavit of AW-1, besides on Ex. A-1 to A-30, strenuously contended that the claim of the applicant stands established against both the defendants, as such, the applicant is entitled for a recovery certificate as prayed.
6.3 Ld. Counsel further contended that though the first defendant filed a reply statement opposing the claim on some baseless and untenable grounds, he failed to substantiate any of the said contentions by filing a counter proof affidavit, as such the so called defence put forth by the first defendant remained unestablished besides the claim of the applicant against the first defendant stands unrebutted.
6.4 In so far as the 2nd defendant is concerned the Ld. Counsel for the applicant at the outset submitted that in so far as the defence put forth by the 2nd defendant that there is no cause of action against the 2nd defendant for filing the present claim and that the 2nd defendant had not breached any of the provisions of Ex. A-27 Master Agreement for Services, much less, clause 12.1, are unacceptable in the light of the evidence of AW-1 and the documents marked as exhibits.
6.5 Ld. Counsel would contend that by virtue of the Ex. A-27 Master Agreement for Services between the applicant and the 2nd defendant, wherein the 2nd defendant as a service provider in terms of Clause 12.1 has agreed to act as an agent or representative of the applicant bank at all the storage areas and has further undertaken to take necessary action to ensure with the safety, security and proper upkeep and maintenance of all the commodities including quality, maintenance, quantity, weight etc., so stored, besides in terms of Clause 12.1 of the above agreement had undertaken to indemnify the applicant bank for any losses incurred to the bank due to any misrepresentation of facts in respect of the quality and quantity of the commodities including the ownership etc., pledged to the bank or due to the documents submitted to the bank having been forged or incomplete or any case of impersonation or disbursing loans and / or releasing stocks against forged documents that would have occurred during the course of complying with the said acts specified herein or any loss incurred due to the failure on the service provider's part in complying with any of the obligations under this agreement / or due to loss, if any suffered by the bank, due to the misdeeds whether intentional / unintentional, of the Service Provider Personnel. Service Provider further indemnify the bank against any loss, costs damages or expenses incurred or sustained by the bank on account of deficiency in the admissibility of any documents the execution of which has been overseen by the Service Provider. The service provider agrees to pay the bank all amounts demanded by the bank upon receipt of notice from the bank and that it shall accept the amount stated as reasonable estimate of the loss / damages incurred / suffered by the bank in connection therewith.
6.6 Ld. Counsel further contended that the 1st defendant had removed the commodities from the godown which was maintained by the 2nd defendant service provider and has committed fraud and criminal acts, which resulted in applicant bank lodging a police complaint on 13.11.2017 against both the defendants and others and the said complaint is under investigation. Thus, by virtue of Clause 12.1 of Ex. A-27 Master Agreement for Services the 2nd defendant became liable to indemnify the losses sustained by the applicant as such the second defendant is equally liable for the OA claim. Thus, contending Ld. Counsel prayed for recovery certificate against both the defendants.
7.0 No arguments were advanced on behalf of the 1st defendant.
8.0 Per contra, Ld. Senior Counsel, Mr. Om Prakash, appearing for the 2nd defendant vehemently contended that as per the copy of the OA served on the 2nd defendant relief in OA was sought only against the first defendant and no relief is prayed against the 2nd defendant, as such the OA is liable to be dismissed in limini against the 2nd defendant.
8.2 Ld. Sr. Counsel further contended that even if the contention of the applicant that the claim as made against both the defendants is accepted, the present OA against the 2nd defendant is nothing but an abuse of process of law, entirely baseless and devoid of merits. It is further stated that the 2nd defendant is neither a borrower nor a guarantor for the credit facility availed by the first defendant from the applicant bank. It is stated that the applicant bank has availed warehouse managing services form the 2nd defendant under Ex. A-27 Master Agreement for Services dated 27.1.2014. Therefore, the contractual relationship between the applicant and the 2nd defendant would cover only by the terms and conditions of Ex. A-27 Master Agreement for Services and not anyway by the loan or security documents executed between the first defendant and the applicant. In so far as the alleged loss of security is concerned according to the Ld. Sr. Counsel the same is premised and stated to have arisen out of the alleged fraud perpetrated by the first defendant, even if the said allegation is established the same falls entirely outside the scope and ambit of clause relating to indemnity enshrined under Clause 12.1 of Master Agreement for Services. So much so the claim against the 2nd defendant is wholly unsustainable.
8.3 Ld. Sr. Counsel further submitted that in support of the so called plea of fraud by the 1st defendant, the allegation against the 2nd defendant herein that the commodities are being maintained by the 2nd defendant and caused loss to the applicant bank, is not true and does not stand established either in the pleadings or under any document relied upon by the applicant. As such the claim against the 2nd defendant is liable to be dismissed.
8.4 Having heard the Ld. Counsel for the Applicant and Ld. Senior Counsel for the 2nd defendant, at the outset it is to be stated that merely because the 2nd defendant herein is neither a borrower nor a guarantor, the right of the creditor to recover the amount or the jurisdiction of the Tribunal, against the 2nd defendant as well need not be doubted for the simple reason that the Recovery of Debts and Bankruptcy Act, 1993 (in short RDB Act) provides for recovery of "debt" which is claimed as due from any person by a bank or financial institution, payable during the course of any business activity undertaken by the bank. In this regard, reference can straightaway be made to definition under Section 2(g) of the RDB Act, which is as under: -
"(g) debt means any liability (inclusive of interest) which is claimed as due from any person by a bank or a financial institution or by a consortium of banks or financial institutions during the course of any business activity undertaken by the bank or the financial institution or the consortium under any law for the time being in force, in cash or otherwise, whether secured or unsecured, or assigned, or whether payable under a decree or order of any civil Court or any arbitration award or otherwise or under a mortgage and subsisting on, and legally recoverable on, the date of the application and includes any liability towards debt securities which remains unpaid in full or part after notice of ninety days served upon the borrower by the debenture trustee or any other authority in whose favour security interest is created for the benefit of holders of debt securities or"
There is no dispute that Ex. A-27 agreement has been entered by the applicant bank with the 2nd defendant, as a part of its business activity. Therefore, by virtue of the aforesaid definition it would be abundantly clear that debt' which is claimed as due by the bank or financial institution if had arisen during the course of its business activity, an application under Section 19(1) of the Act would lie before the Tribunal.
8.5 In so far as the subject debt claimed as due from the 2nd defendant is concerned the same appears to be on the premise that Clause 12.1 in Ex. A-27 Master Agreement for Services, entered into by the 2nd defendant with the applicant bank has been breached by the 2nd defendant. In the cause of action paragraph the applicant has specifically pleaded that the 2nd defendant had breached the Master Agreement for Services entered with the applicant, so much so it cannot be said that the claim of the applicant as made against the 2nd defendant is without any cause of action or per se not maintainable. I therefore hold that the claim against the 2nd defendant is maintainable.
8.6 Now, I shall deal with the aspect whether or not the applicant had established its case against the 2nd defendant. Admittedly, under Ex.A-27 ,Master Agreement for Services entered into between the applicant and the 2nd defendant, the 2nd defendant as a service provider had inter alia, undertaken to provide:
"3.6 While providing the Service, the Service Provider shall:
(i) Observe the best service quality standards and ensure that it renders its obligation to the satisfaction of the Bank.
(ii) Meet the various deadlines, targets and standards as mutually agreed to, in writing by the Parties from time to time.
(iii) Discuss and review the progress, on a regular basis and as and when required by the Bank;
(iv) Perform the Services on continuous basis without any interruption during the validity period of this Agreement; and
(v) Not do or cause to do anything which is prejudicial to the interest of the Bank or whereby the business or reputation of the Bank may be injured or damaged."
besides
"to indemnify the applicant bank for any losses incurred to the bank due to any misrepresentation of facts in respect of the quality and quantity of the commodities including the ownership etc., pledged to the bank or due to the documents submitted to the bank having been forged or incomplete or any case of impersonation or disbursing loans and / or releasing stocks against forged documents that would have occurred during the course of complying with the said acts specified herein or any loss incurred due to the failure on the service provider's part in complying with any of the obligations under this agreement / or due to loss, if any suffered by the bank, due to the misdeeds whether intentional / unintentional, of the Service Provider Personnel."
8.7 That apart, the 2nd defendant further agreed to
"indemnify the bank against any loss, costs damages or expenses incurred or sustained by the bank on account of deficiency in the admissibility of any documents the execution of which has been overseen by the Service Provider. The service provider agrees to pay the bank all amounts demanded by the bank upon receipt of notice from the bank and that it shall accept the amount stated as reasonable estimate of the loss / damages incurred / suffered by the bank in connection therewith, Service Provider reserves its right to dispute against any unlawful or unproven monies so asked or demanded by the bank through the above notice against arbitrator as mentioned in Clause 19.2. of the agreement."
8.8 Therefore, it is clear as crystal from Clause 12.2 of Ex. A-27 Master Agreement for Services that the 2nd defendant is bound to indemnify the applicant upon establishing loss or damage caused to the applicant in terms of clause 12.2 of Ex. A-27 agreement.
8.9 In the above backdrop, when the averments in the OA are examined the applicant has not even whispered that its claim against the 2nd defendant was based on "loss suffered or damage caused" to the applicant in terms of Clause 12.2 of Ex. A-27 agreement. What all pleaded was that "the 1st defendant had stolen the commodities from the godown which were under the supervision of the 2nd defendant and that a police complaint was lodged before the concerned police and the same is under investigation". Thus, pleading as to the involvement of the 2nd defendant in the alleged act of theft said to have been committed by the 1st defendant, are conspicuously absent.
8.10 It is needless to say that when the liability of the 2nd defendant in terms of Clause 12.2 of Ex. A-27 agreement arises only upon a proven case of losses incurred by the bank due to
"any misrepresentation of facts in respect of the quality and quantity of the commodities including the ownership etc., pledged to the bank or due to the documents submitted to the bank having been forged or incomplete or any case of impersonation or disbursing loans and / or releasing stocks against forged documents that would have occurred during the course of complying with the said acts specified herein or any loss incurred due to the failure on the service provider's part in complying with any of the obligations under this agreement / or due to loss, if any suffered by the bank, due to the misdeeds whether intentional/unintentional, of the Service Provider Personnel or any loss, costs damages or expenses incurred or sustained by the bank on account of deficiency in the admissibility of any documents the execution of which has been overseen by the Service Provider"
absence of pleadings on the above lines, itself bears testimony to the fact that the applicant's claim against the 2nd defendant is not based on beach of Clause 12.1 of Ex. A-27 agreement.
8.10 That apart, even in respect of the so called police complaint said to have been given against the defendants, not even an iota of proof has been placed, before this Tribunal. Moreover, in the reply statement the 1st defendant had categorically stated that he had approached the Hon'ble High Court of Madras, against the Police complaint filed against him by filing Crl. O.P. No.16541 of 2017 and that it was reported that the complaint lodged by the applicant has been closed by the police and the said fact was also recorded by the Hon'ble High Court, as such no criminal case whatsoever is pending against the 1st defendant. Despite the said assertion, the applicant bank did not endeavor to place any material before the Tribunal, in support of its contention that the investigation on its complaint is pending with the Police. Even assuming that the investigation on the complaint is pending, mere pendency of the criminal complaint by itself will not give rise to the cause of action for the applicant to invoke the indemnity clause contained in Clause 12.1, against the 2nd defendant. Therefore, the claim against the 2nd defendant is wholly unsustainable and untenable and the applicant failed to establish its claim against the 2nd defendant. Hence, the claim against the 2nd defendant is liable to be dismissed and accordingly the same is dismissed.
8.7 Therefore on careful perusal of the Proof Affidavit of AW-1 besides Exhibits A-1 to A-30 the Tribunal is fully satisfied that the applicant has established its claim against 1st defendant alone and the claim against 2nd defendant is dismissed, however, without costs. This point is answered accordingly.
9.0 Point No.2
Whether the applicant bank is entitled for pendent lite and future interest, if so, at what rate?
9.1 In terms of Sec. 19 (20) of the RDB Act, the Tribunal has been empowered to pass an order regarding payment of interest from the date on or before which payment of the amount is found due, up to the date of realisation or only payment, as it think fit to meet the ends of justice.
9.2 Hon'ble Supreme Court, in its recent judgement (reported in II 2009 BC pg. 696) in the matter of State Bank of India - vs - Sarath Textiles, held that "Sec.19 (20) of the RDDB & FI Act confers discretion on the Tribunal to award interest on the applicant being as it thinks fit to meet the ends of justice."
9.3 Hon'ble Supreme Court of India in the matter of Central Bank of India - vs - N. Raveendra (reported in 2002 [1] SCC pg. 367) held that "Sec. 34 of CPC confers discretion on the Court to award or not to award interest or to award interest at such rate as it deems fit de-horse notwithstanding the contract between the parties." Sec. 19 (20) of the RDDB & FI Act is akin to Sec. 34 CPC.
9.4. While it is the case of the applicant that the applicant bank is entitled for contractual rate of interest till discharge of the entire outstanding dues, however, the defendants would contend that in so far as pendente lite and future interest is concerned, the contractual rate of interest may not be applied. Having carefully considered the submission, the Tribunal is of the view that, there are no justifiable reasons or circumstances warranting interference in the contractual rate of interest, by this Tribunal. Therefore, under these circumstances, the Tribunal is not inclined to interfere with the contractual rate of interest as claimed by the applicant bank. Point No.2 is answered accordingly.
10.0 For the reasons stated as above, I find that the applicant bank has successfully proved its OA claim against the 1st defendant alone and failed to establish the claim against the 2nd defendant. Hence applicant bank is entitled for a Recovery Certificate for Rs.57,36,760/- being Finance against Warehouse Receipt Facility (Maize) of Rs.10,38,923/- together with interest @9.30% p.a. with monthly rests and Finance against Warehouse Receipt Facility (Soya Bean Doc) together with interest @9.80% p.a. with monthly rests from the 1st defendant and for sale of the application schedule mentioned property along with costs of the application. The 1st defendant is also personally liable for the TA claim to the extent specified hereunder. The claim against the 2nd defendant is hereby dismissed. However, without costs.
In the result, application is partly allowed as under:
(a) The applicant bank is entitled to recover a sum of Rs.57,36,760/- being a sum of Rs.10,38,923/- due under Finance against Warehouse Receipt Facility (Maize) A/c No.10616671100097699 together with interest @9.30% p.a. with monthly rests and a sum of Rs.46,97,837/- due under Finance against Warehouse Receipt Facility (Soya Bean Doc) A/c No.1061671100117869 together with interest @9.80% p.a. with monthly rests from the date of the application till the date of its realization in full, from the 1st defendant.
(b) It is further ordered that in case of default of payment by the defendants, the Applicant Bank is at liberty to sell the application schedule mentioned property in terms of the order in para (a) supra and appropriate the sale proceeds towards the decreetal dues.
(c) If the sale proceeds are not found sufficient to cover the amount due and payable to the Applicant Bank, 1st defendant is personally liable for all such amounts due under para (a) above.
(d) The claim against the 2nd defendant is dismissed, however without costs.
(e) It is further ordered that any amount remitted or realized if any, during the course of the proceedings, shall be given due credit to the loan account of the defendants.
(f) The applicant bank is entitled for costs of this application.
12.0. The applicant bank is directed to file costs memo within two weeks of the receipt of this order.
13.0 Issue recovery certificate in favour of the applicant bank in terms of this final order.
14.0. Communicate a copy of the order to the parties concerned in terms of Rule 16 read with Rule 2(c) of DRT (Procedure) Rules, 1993.
(Dictated to PS, transcribed by him, corrected, signed and pronounced by me in Virtual Court, through Video Conference on this the 31st day of August, 2020)