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Judgment
The appellant no.1, a partnership Firm of appellants 2, 3(now dead) and respondent no.2 herein, had business dealings with Raymond Ltd., well known in the field of manufacture of fabrics, as its authorized dealer. They used to get cloth/fabric from Raymond Ltd. for which supplies Raymond Ltd. used to issue Invoices, Lorry Receipts etc. The appellants then used to submit the same to erstwhile Centurian Bank of Punjab which had sanctioned bill discounting facility upto the limit of one crore of rupees to appellant no.1 in the year 2002 which facility was extended from time to time on yearly basis. The said bank used to credit the account of appellant no.1 with it and in turn the amount of the bills raised by Raymond Ltd. and discounted by the Bank used to be credited in the account of Raymond Ltd. which was also with Centurian Bank of Punjab which Bank subsequently got merged with HDFC Bank, respondent no.1 herein. The appellants had secured the payment of bank' dues by hypothecation of its stocks and also by issuance of postdated cheque (PDCs). The appellant no.1 used to clear the dues payable to Centurian Bank which it was paying to Raymond Ltd. as per the terms of sanction of Bill discounting facility and on the instructions of the appellants. The appellants used to deliver to Cnnturian Bank bills not one by one but together many bills of exchange with the invoices of Raymond Ltd. alongwith other relevant documents used to be submitted to the Bank with covering letters authorising the bank to debit their account and credit the account of Raymond Ltd. with the total amount of various bills. After the merger of Centurian Bank with HDFC Bank appellant no.1 had become defaulter in payment of the dues of the bank under bill discounting facility and the OD account which also was allegedly opened by appellant no.1 Firm in 2005 and bill discounting facility was converted into Over Draft(O.D.) account and when bank's dues, as per the statement of account of the borrower Firm maintained by the Bank were not cleared proceedings were initiated by HDFC Bank under SARFAESI Act by declaring the account of the appellants as NPA on 31.03.2019 on which date a sum of Rs. 50,47,706/13 was due. Thereafter by continuing to add interest including penal interest thereon a sum of Rs. 73,22,447/84 became outstanding on 30.04.2011 and for recovery of that amount O.A. was filed against the appellants and respondent no.2 for recovery of bank's dues amounting to Rs. 73,22,447,84 and pendente lite and future interest thereon @ 15% p.a. with monthly rests as also penal interest @ 2% under Section 19 of the Recovery of Debts Due to Banks and Financial Institutions Act,1993. The appellant no.1 was impleaded as the borrower and appellant no.2 Ashok Kumar and the deceased appellant no.3, father of appellant no.2, and respondent no.2 herein were impleaded as defendants in the Original Application(O.A.) being partners of the borrower Firm as well as personal guarantors.
The O.A. was contested by appellant no.2 herein by filing a written statement. He opposed the claim of HDFC Bank inter alia on the grounds that the O.A. was bad for non joinder of Raymond Ltd., it was time barred and that whatever was due in the bill discounting account was already cleared and the O.A. had been filed on false and fabricated documents prepared on blank signed documents obtained by Centurian Bank. Territorial jurisdiction of Delhi DRT was also disputed. Appellant no.2 also pleaded that the partnership Firm had been dissolved on 31.03.2004 and, therefore, no liability of the dissolved Firm could be fastened upon him. He also pleaded that the bank and Raymond Ltd. had colluded and caused loss of Rs. 1.50 crores to the defendants.
Evidence by way of affidavits was adduced from the side of the Bank and appellant no.2 Ashok Kumar. From the side of the bank documents of financial facilities were also exhibited.
The learned DRT, however, rejected all the defence pleas of the appellants and decreed the O.A. of the bank vide order dated 02.03.2015. However,relief in the form of interest being converted from claimed compound interest to simple interest and which relied according to the bank was a huge relief, was granted to the appellants.
The impugned order of DRT is re-produced below:-
"This is an application under Section 19 of The Recovery of Debts Due to Bank and Financial Institutions Act for recovery of the sum of Rs. 73,22,447/-
D1 is a partnership firm constituted by the D2 to D4 as its partners. D1 is the borrower and D2 to D4 are the guarantors. The defendants applied for Bill Discounting Limits of Rs. 100 lacs from the erstwhile Centurian Bank Ltd. in 2002. The defendants executed security documents on 01.06.2002 and D2 to D4 stood as guarantors. The credit facility was renewed and overdraft facility was granted for which documents were executed on 21.02.2005. The applicant granted financial assistance in the form of overdraft of Rs. 100 lacs. Defendants agreed to pay interest @ 15% p.a. on monthly rest subject to the change as per Reserve Bank of India guidelines and penal interest @ 2% in case of irregular / overdue account. The defendants operated the account and the account became irregular. The account was declared as NPA at 31.03.2009. The amount outstanding as per the statement of account is the sum of Rs. 73,22,447/-. The applicant has claimed the sum of Rs. 73,22,447/- with interest @ 15% p.a on monthly rest and penal interest @ 2% p.a and cost.
D2 filed written statement contending as follows:-
The OA is bad for non-joinder in the absence of Raymond Limited which is a proper and necessary party. The applicant and Raymond Limited were in collusion, caused wrongfully loss of Rs. 1.50 crores to the defendant. The Bill of Exchange produced is blank, there is no date, number and due date of hundi amount. The applicant and Raymond Limited have not acted in accordance with the terms and conditions of the bill discounting. The lender obtained signature of the defendant on blank paper and misused the same to institute the OA. The OA is barred by limitation. This Tribunal does not have territorial jurisdiction. The defendant was doing its business at Agra and the agreement was executed at Agra. The applicant has filed up the agreement to show that it has taken place at Delhi. D2 is no more partner of D1. The partnership firm was dissolved on 31.03.2004 and there is no liability on the defendant towards the partnership. The bank has calculated interest @ 15% but the letter dated 15.10.2003 suggest the rate of interest 11%. It is denied that the defendant has applied for the renewal of the credit facility. It is denied that the discounting limit was converted into overdraft facility. The applicant has wrongfully declared the account as NPA. The applicant in not entitled to recover the amount as claimed and the OA is liable to be dismissed.
The applicant filed re-joinder to the written statement of D2 denying all the averments and allegations.
D1, D3 and D4 were declared ex-parte on 18.06.2012.
On behalf of the applicant Sh. Kuldeep Singh - Senior Manager filed affidavit and proved AW-1/1 to AW- 1/15. D2 filed affidavit.
The points for determination are:
(i) Whether the OA is maintainable?
(ii) Whether D2 had not executed valid documents?
(iii) Whether the applicant is not entitled to recover the amount as claimed?
(iv) Relief.
Point No. (i)
(a). The original lender was Centurian Bank Ltd. which was amalgamated with applicant HDFC Bank Ltd. The fact that D1 firm and its partners had availed the credit facility from the applicant is not a disputed fact. D2 has stated that this Tribunal has no territorial jurisdiction since loan agreements were executed at Agra. The defendants are residing at Agra. The applicant, the creditor is functioning as a bank at Connaught Circus, New Delhi from which branch the loan was advanced. Demand note, delivery letter AW- 1/4, AW-1/11 consent for disclosure are addressed to Centurian Bank Ltd., Connaught Place. The hypothecation agreement shows the applicants address at New Delhi. The agreement was executed at New Delhi and this Tribunal has territorial jurisdiction.
(b) The defendant then submitted that the OA is barred by limitation. The initial sanction for bill discounting was on 01.06.2002. Thereafter, there was a renewal of bill discounting limit and document was executed on 10.11.2003. The borrower had also executed revival letter on 30.12.2004. The bill discounting limit was converted to overdraft facility on the same terms and conditions on 21.02.2005. The defendant had executed and submitted to the bank the hundis for bill of exchange on 31.03.2009. The account was declared as NPA and thereafter the OA was instituted on 23.05.2011. The statement of accounts also shows that the defendant has deposited the sum of Rs. 80,000/- on 24.07.2008. This is the date of part payment of the date and the period of limitation would start to run from this date. Thereby, the OA filed on 23.05.2011 is within the period of limitation.
(c) D2 has further contended that the OA is bad for misjoinder in the absence of Raymond Limited. There was no privity of contract between applicant bank and Raymond Limited. Raymond Limited is a party identified by the defendants only. Raymond Limited had drawn the bills of exchange under the bills negotiated scheme. The applicant had honored the bills and the liability was on the firm and its partners. The bank was never engaged in the underlying business in between D1 firm and Raymond Limited. Therefore Raymond Limited is not a necessary party. D2 makes an allegation that applicant bank was in collusion with Raymond Limited and thereby the defendants suffered a loss of Rs. 1.50 crores. Except making such a wild allegation defendant has not succeeded to prove what kind of fraud was played by the applicant in collusion with Raymond Limited. The defendant in his evidence also has not established how the credit transaction stated by the applicant could not be adjudicated in the absence of Raymond Limited. On the materials placed before me and on its appreciation I find that Raymond Limited is not a necessary party and therefore the OA is not bad for non- joinder of Raymond Limited. The OA is maintainable.
Point No. (ii)
D2 has stated that he was asked to sign on blank documents and the bank has subsequently filled up the same. D2 has also a case that he was not a party to the renewal/revival letters executed subsequently. AW-1/3 and AW-1/4 promissory note dated 01.06.2002 and delivery letter and AW-1/5 hypothecation agreement, AW-1/6 letter of arrangement and AW-1/7 letter of indemnity contain the signature of D2 as well as the other defendants. AW-1/9 is the letter dated 15.10.2003 addressed to D2 by the applicant bank informing about renewal of bill discounting limit for a further period of 12 months. On 10.11.2003 letter giving consent for disclosure of information to Credit Information Bureau (India) Ltd. (CIBIL) was signed by D2 as authorized signatory of the firm. Then how can D2 now say that he was not aware of the renewal. The revival letter AW-1/11A dated 30.12.2004 is also signed by D2 on the revenue stamp affixed on it. This is also a genuine document. Thus, I find from the documents available that D2 had signed the documents and he has executed valid documents. His contention that the bank obtained his signature on the blank document is only to be rejected.
Point No. (iii)
(a) The applicant has stated that after availing the credit facility the defendants became irregular in payment. The account was declared as NPA on 31.03.2009. As on 30.01.2011 the amount due is the sum of Rs. 73,22,447/-. The applicant has produced the statement of account. The defendant has stated that the applicant has charged excessive rate of interest that the contractual rate @ 11% p.a. There is nothing on record to show that the rate of interest was 11%. On the other hand the promissory note shows the rate of interest as 15%. The bank has charged the contractual rate of interest. The defendants had also agreed for penal interest @ 2% p.a.
(b). D2 has stated that the firm was dissolved on 31.03.2004 and therefore he has no liability for the dues for the applicant bank. D2 had executed the deed of guarantee AW-1/8. D2 is bound by the deed of guarantee alongwith the other guarantor. The fact that the firm is dissolved on 31.03.2004 will not absolve D2 from his contractual obligation created on the basis of the deed of guarantee. Therefore, D2 is liable on the basis of the deed of guarantee.
(c) The applicant is entitled to recover the sum of Rs. 73,22,447/-. D1 to D4 are liable as the firm and its partners and D2 to D4 are liable as guarantors also. D1, D3 and D4 have not even contested the case. The applicant has claimed interest @ 15% p.a. on monthly rest and 2% penal interest. As far as interest pendentelite and future is concerned penal interest and compounding rest can been avoided since that may be unduly harsh. The applicant shall be entitled to simple interest @ 15% p.a. The applicant is also entitled to cost. D1 to D4 are jointly and or severely liable for the amount claimed by the applicant bank.
Point No. (iv)
In the result.
(i) The OA is allowed.
(ii) The applicant bank shall be entitled to recover the sum of Rs.73,22,447/- with simple interest @15% p.a from 23.05.2011 onwards until recovery with cost from D1 to D4 jointly and or severally.
(iii) The Recovery Certificate shall be issued on the above terms.
(iv) D1 to D4 are directed to appear before the Recovery Officer on 06.05.2015."
From this order of DRT it is clear that all the objections raised by the appellants-defendants have been rejected and feeling aggrieved the present appeal has been filed by them to challenge the legality of the reasons given by the learned DRT. However, in this appeal as well as during the course of arguments the appellants have sought to impugn the order of the DRT on totally new grounds and on which alone the impugned order was being sought to be challenged and which grounds were neither pleaded before the DRT nor argued.
As noticed in the earlier paragraphs of this order, the defence of the appellants-defendants before the DRT was that the bank had used blank documents on which their signatures had been obtained by the officials of Centurian Bank in order to bring the suit within the period of limitation, Delhi DRT had no territorial jurisdiction in the matter, the O.A. was time barred and that there was collusion between the bank and Raymond Company who together had caused loss of Rs. 1.5 crores to the appellants. At that time the appellants had not raised any controversy regarding the correctness of the statement of account and any of the debit entries made therein. A perusal of the statement of account of appellants' account no.101104000001787 (Ex. AW-1/13) that the appellants had been from time to time depositing money in the said account and withdrawing also. The bank has been making payments to Raymond Ltd. from this account on the insytructions of the appellants and which fact was not disputed by Mr. Pallav Saxena, learned counsel for the appellants during the course of arguments. The appellants had not at any time raised any objection against any of the entries regarding payments made to Raymond Ltd. There are other withdrawl entries also and no dispute about any of those entries also was raised by the appellants' counsel. However, in this, appeal the appellants have picked up certain entries from the statement of account filed by the bank and have sought to urge that those entries of payments made to Raymond Ltd. amounting to Rs.95,64,314/- were fictitious inasmuch as they were not supported by any authorization from the side of the appellants authorizing the bank to transfer almost a crore of rupees from their account to the account of Raymond Ltd. In support of the submission that no liability could be fixed on the defendants without bring on record relevant supporting documents in the form of authorization by the appellants to make those transfers Mr. Pallav Saxena cited one judgmemt of the Hon'ble Supreme Court in "Chandradhar Goswami & others vs Gauhati Bank Ltd.",(1967) 1 SCR 898. The appellants, however, did not claim before the DRT in their written statement that they were not being given statements of their account which shows that they were fully aware of the debit-credit entries in their account. Before the DRT the appellants had not based their defence on the ground that some of the entries, out of thousands of entries in their account, were either fictitious or duplicate ones as was argued by Mr. Saxena before this appellate Tribunal. This submission therefore cannot be entertained by this Tribunal.
For the aforesaid conclusion I find support from the following paras of the judgment of Hon'ble Supreme in its judgment in the case of Nirod Baran Banerjee vs Dy. Commissioner Of Hazari Bagh", 1980 AIR 1109:1980 SCR (2)1043:-
"8. The Attorney General while repelling the arguments of the appellant submitted that there can be no dispute with the propositions laid down by this Court regarding the interpretation of Art. 299 of the Constitution of India but that the question whether or not there was an agreement which fulfilled the requirements of Art. 299 is not a pure question of law but is a question which depends on investigation of facts. He added that as the appellant did not plead this point either before the Trial Court or before the High Court when the appeal was heard on merits the appellant cannot be allowed to raise it for the first time either in this Court or in his application given before the High Court for granting a certificate of fitness. It was argued by the Attorney General that if the point had been pleaded at the initial stage, the respondent might have been in a position to show that an agreement conforming to the provisions of Art. 299 of the Constitution of India existed. We are of the opinion that the contention raised by the Attorney General is sound and must prevail. In the case of Kalyanpur Lime works Ltd. v. State of Bihar and Another(4) a similar situation arose and this Court refused to entertain the point relating to the applicability of s. 30 of the Government of India Act 1915 which corresponds to Art. 299 of the Constitution or s. 175(3) of the Government of India Act, on the ground that the party concerned did not raise the same in their pleadings. In this connection this Court observed as follows:-
"The first question which arises in this connection is whether the contract was to be executed by a formal document or whether it could be spelt out from the correspondence in which the negotiations were carried on by the parties. We do not think it necessary to go into this question, for assuming that a formal document was necessary, the plea of section 30, it is to be noted, was not raised in the pleadings. Objection is taken on behalf of the appellant that the point not having been raised in the written statement it was not incumbent upon the plaintiff to show that the contract was executed according to the provisions of section 30, before it could be specifically enforced and reliance was placed upon the provisions of order VI, rule 8, and Order VIII, rule 2 of the Civil Procedure Code."
This Court pointed out that in view of the provisions of order VI Rule 8 and Order VIII Rule 2 of the Code of Civil Procedure, the appellant would be debarred from raising the point for the first time before this Court or even before the High Court. The facts of the present case appear to be on all fours with facts of the case in the decision cited above. In the instant case also, the appellant contented himself by relying on the resolution by the Government, treated it as a valid arbitration agreement and never raised the question that the said resolution was hit by Art. 299 of the Constitution of India. On the other hand, the appellant fully participated in the arbitration proceedings and having taken the benefit of a decision by the Board in his favour made a complete somarsault only when the decision went against him, by taking the plea now under examination, which doubtless required investigation of facts. Even that plea too he took neither before the Additional Sub-Judge nor in the High Court when the appeal was heard on merits but only for the first time in the application which he gave for granting leave to appeal to this Court. In these circumstances it is manifest that if the appellant had raised the plea before the Trial Court that the arbitration agreement was not in consonance with Art. 299 of the Constitution of India, the respondent may have been in a position to rebut the plea by producing evidence and circumstances to show that an agreement for arbitration was authenticated in the form required by Art. 299 of the Constitution. It is well settled that no evidence can be looked into by the Court for which there is no foundation in the pleadings. We cannot therefore allow the appellant to raise the plea for the first time in this Court and the High Court also ought not to have entertained it at the stage of the application for a certificate of fitness to be granted for leave to appeal to this Court. No other point was pleaded before us."
In order to invite a verdict regarding the correctness of particular entries in the statement of account the appellants ought to have laid the foundation in their pleadings before the DRT and having not done that this Tribunal will not enter into those highly contentious factual controversy between the parties. Nor this Tribunal for the same reason is inclined to allow the appellants to adduce additional evidence also for which purpose an application was also filed in this appeal.
Therefore, the order of the learned DRT for issuance of a recovery certificate for Rs. 73,22,447/- in favour of the respondent no.1 Bank does not call for any interference.
The learned DRT had awarded pendente lite and future interest of the said principal amount adjudicated @ 15% p.a.(simple). The bank has not felt aggrieved with the rejection of its claim of compound and penal interest. The appellants have pointed out that rate of interest originally fixed as per bank's documents was 15% p.a. but subsequently it was reduced to 11% p.a. when the bill discounting facility was renewed in 2003 and then to 9% p.a. in 2005 when again the bank had extended the bill discounting facility. This submission was not disputed by the learned counsel for the bank. Therefore, this Tribunal is inclined to award pendente lite and future interest @ 9% p.a. on the adjudicated amount of Rs.73,22,447/-.
This appeal is accordingly partly allowed. There shall now be a recovery certificate for a sum of Rs. 73,22,447/- with interest thereon @ 9 % p.a. in place of 15% p.a. awarded by the DRT from 23.05.2011 till recovery is made in full from the appellants and respondent no.3. The DRT shall prepare an amended recovery certificate and forward the same to the recovery officer for expeditious recovery.