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Judgment
Ranjit Singh, J
The appellant borrowers have impugned the order passed by the Tribunal below allowing the Original Application filed by the respondent-Bank and ordering recovering of Rs. 36,96,813/- together with pendente lite and future interest @ 12% p.a. with quarterly rests from the date of filing the Suit till the actual realization of the entire amount.
This appeal is filed by three appellants. One of the defendants, namely Mr. Atanu Kumar Ghosh, a proforma respondent, has not filed any appeal against the impugned order. Appellant Nos. 2 and 3 are the Directors of the appellant No. 1 Company. The appellant company had an account with the respondent-Bank. The company was engaged in the business of developing and exporting of software being a 100% Export Orient Unit registered under the Software Technology Parks of India (STPI), Ministry of Information Technology, Government of India. The company claims to be doing no business at present but states to have availed credit facility from the respondent-Bank for the export orders received in the years 2001-2002 in respect of East West Pharmaceutical, USA. As per the appellants, respondent-Bank had sanctioned Clean Packing Credit (CPC Limit) of Rs. 30 lac period of CPC not to exceed 90 days, margin 25% with interest as per RBI guidelines which was then 8%; Foreign Discounting Bill (FDB/FBE) rate of interest 8%, issuance for FBE equivalent to 90 days. The terms and conditions are contained in the sanctioned Letter No. 279 Cr. BBS 2249 2002 dated 19th March, 2002.
As per the appellant, CPC Limit and FDB/FBE Limit were duly insured and secured by Export Credit Guarantee Corporation Ltd. (for short, ECGC). A comprehensive ECGC cover was obtained to secure the interest of the Bank, which was a term of the sanction letter. It is explained that the comprehensive policy cover is nothing but insurance to cover commercial risk of the exporters. This comprehensive policy cover was both for pre-shipment and post-shipment (specific buyerwise cover) granted to the exporters. As per the appellants, in the instant case, pre and post shipment financial assistance, i.e., CPC Limit and FDB/FBE, the buyer was fully covered under the comprehensive insurance cover from ECGC for a sum of Rs. 50 lacs and post-shipment guarantee cover along with individual buyerwise policy limit for ECGC for shipment advance of Rs. 15 lac covering the buyer East West Pharmaceutical, 4421, NE 25th Avenue, Ft. Lauderbale, Florida, USA. As per the appellant, the original policy in this regard was in the custody of the respondent-Bank.
The case set up by the appellant is that in case of a comprehensive ECGC policy, as regards CPC limits/pre-shipment limit is concerned, it can be said that the same needs to be recovered from the borrower. However, as regards post-shipment limit-FDB-buyerwise limit, the same is nothing but like any insurance cover and in case of loss of money, it is the Bank which could have lodged its claim with ECGC to recover the amount of the said loan.
The appellant-Company through its authorized Director had approached the respondent-Bank for assistance in July 2000. At the request of the appellants, the Bank sanctioned CPC Limit to the tune of Rs. 40 lacs and FDB/FBE Limit to the tune of Rs. 45 lacs. The defendant company through its Authorized Signatory/Director executed and delivered various documents on 26th July, 2000 and 31st August, 2000 and agree to pay interest at such rate or rates as many be revised by Reserve Bank of India from time-to-time subject to minimum of 10% p.a. with quarterly rests. The appellant Nos. 2 and 3 and proforma respondent No. 2 who were the directors of the appellant company also became co-applicants/guarantors and executed and delivered the following documents:
"(i) Guarantee covering letter along with guarantee agreement and undertaking all dated 26th July, 2000 for Rs. 85 lacs signed by Shaswat Sud for Kranti Kumar Sud.
(ii) Guarantee covering letter along with guarantee agreement and undertaking all dated 26th July, 2000 for Rs. 85 lacs signed by Atanu Kumar Ghose.
(iii) Guarantee covering letter along with Guarantee agreement and undertaking all dated 31th August, 2000 for Rs. 85 lacs signed by Kranti Kumar Sud."
Appellant No. 2 confirmed execution of his personal guarantee dated 31st August, 2000 through his letter dated 23rd July, 2002.
Subsequently, however, appellant No. 1 approached the respondent-Bank for renewal of the financial assistance CPC and FDB/FBE (O) which was considered and allowed by the applicant Bank. Renewed/reduced CPC Limit was granted to the extent of Rs. 30 lacs. Appellant No. 1 through its Authorized Signatory executed and delivered the following documents:
"(a) Letter of renewal dated 30th July, 2002 for the reduced limit of CPC and FDB/FBE (O) to the extent of Rs.30 lacs.
(b) Counter Indemnity letter for negotiation/purchase/discount of bills dated 30th July, 2002.
(c) Power of Attorney dated 30th July, 2002 in respect of export bills purchased/negotiated.
(d) Extension letter dated 30th July, 2002 signed by Shri Saswat Sud guarantor confirming guarantee agreement dated 26th July, 2000.
(e) Extension letter dated 30th July, 2002 signed by Shri Kranti Kumar Sud guarantor confirming that guarantee agreement dated 31st August, 2000 for Rs. 85 lacs shall remain unaffected and to remain in force on the same terms and conditions."
The company had acknowledged the liability of all the dues payable to the Bank on 30th July, 2002 and also executed acknowledgement of debt security dated 30th July, 2002 confirming the correctness of outstanding balance of Rs. 10 lacs exclusive of interest as on 1st July, 2002 in CPC account and acknowledgement of debt security dated 30th July, 2002 confirming the correctness of the outstanding balance of Rs. 20,59,616/- exclusive of interest as on 1st July, 2002 in FDB/FBE account.
On account of non-payment of the disbursed amount the Bank had to file Original Application alleging that though the Bank had disbursed Rs. 10 lacs in CPC Limit for software export, the appellant company did not ship the goods and the amount has also not been repaid as a result of which Rs. 7,87,917/- remained unpaid and unadjusted. It is further alleged in the Original Application that the Bank had discounted export bills from time-to-time drawn on various buyers on document against acceptance basis and purchased/discounted/negotiated the bills of appellant No. 1 by way of the post shipment advance by crediting PCI, account and debiting to the separate foreign bill purchase account. For each bill purchased, the Bank sent bills to the foreign Bank for realization. In this manner the Bank purchased two bills of the appellant company for Rs. 12,68,020/- and for Rs.15,71/840/- . Out of the first bill Rs. 7,80,244/- was recovered leaving a balance of Rs. 4,87,776/- and the total balance in both the bills to be recovered in this account is Rs. 20,59,616/-, which remained unpaid. Subsequently, the liability against the first bill increased to Rs. 12,76,600/- at the prevalent TT selling rates and the liability in respect of the second bill increased to Rs. 15,69,600/-. The total outstanding amount of both the bills debited to the overdue account and the said overdue amount was transferred to LPD Account No. 01/03. Since the appellant took no steps for realizing the said bills, the Bank claimed that it was entitled to recover this amount being purchaser of the bills with all costs.
It is also pointed out by the Bank in the Original Application that considering the request made by the appellant No. 1 company, the Bank had allowed temporary overdraft facility in the current account to meet the urgent business commitments of the company from time-to-time and all the credit facilities were availed of by the company. The interest agreed to be payable @ 8% p.a. with quarterly rests or at any other rate of interest as the Bank may decide depending upon the RBI guidelines.
Once the appellants were not able to maintain financial discipline, the account was declared as NPA. The Bank recalled the entire outstanding amount by serving notice dated 5th May, 2014. This notice was received back undelivered with the remark of the postal authorities 'Left'. Another copy of the notice was sent under UPC cover which was not received back. On this basis, the Bank claimed that it has a right to recover an amount of Rs. 38,02,466/- including principal and interest, along with pendente lite and future interest @ 14.25% p.a. compounded with monthly rests plus 2% penal interest.
The appellants contested the claim made in the Original Application. They filed a Written Statement. The appellants admitted of having granted and availed of the credit facilities. The appellants had pleaded that the CPC Limit of Rs. 10 lacs was given, but the said amount had been repaid and nothing was due to the Bank on this count. The appellant had also denied the allegation that the foreign goods were not dispatched by the appellants. As per them, all the bills raised for exports were covered by ECGC for which premium was paid by the Bank from time-to-time. The appellants accordingly pleaded that it was the duty of the Bank to claim the amount from ECGC due to non-receipt of the amount from abroad. As per the appellant, ECGC, vide its letter dated 17th August, 2002 had called upon the Bank to furnish declaration for the export done between January, 2002 and July, 2002, but the Bank did not supply this information and thus had failed to make any claim with the insurer. The appellant would also strongly deny that they had ever requested the Bank for temporary overdraft facility, The appellant would allege that the Bank on its own to cover its own default allowed the temporary overdraft. Accordingly, the appellants had prayed for dismissal of the Original Application.
On the basis of pleadings and assertion raised the Tribunal formulated that following questions which required determination in the case:
"(i) Whether the claim in respect of temporary overdraft facility is forged and fabricated as no request either oral or in writing, was ever made by the defendants for grant of the said facility?
(ii) Whether the OA is liable to be dismissed for the reason that the Bank failed to claim any amount from ECGC of India?
(iii) Whether the defendant signed the Bank documents and the Bank has manipulated the documents thereafter in order to prove its claim? If so effects.
(iv) Whether the Bank has wrongfully made adjustment in the account and has manipulated the statement of account in order to prove its claim?
(v) Whether the pre-Suit interest and the pendente lite interest has been charged by the Bank excessive, arbitrary and contrary to the terms of the loan agreement?"
The Tribunal did not accept the plea of the appellants that claim in respect of temporary overdraft facility was forged and fabricated. The Tribunal rejected this contention by observing that it is difficult to accept that the businessmen of their status having specialization in computer could not care to see and ensure the status of their current account of years together.
Incidentally, the appellants in the present appeal have not seriously contested the other issues except for raising two pleas. Counsel for the appellant would first urge that the appellants had deposited a sum of Rs. 10 lacs in the CPC account, which was the limit and total liability and hence no payment was due in the said account. Counsel would alleged that the Bank while filing the Original Application had not made any mention about this fact of payment and has thus wrongly raised the claim in the Original Application. Counsel would next contend that it was the responsibility of the Bank to make a claim from ECGC once the insurance cover was obtained, and the Bank having failed to do so, cannot claim this amount from the appellants.
Counsel appearing for the Bank, however, would refute both the submissions made on behalf for the appellants. The Counsel for the Bank assisted by a representative of the Bank who has explained in detail how the sum of Rs. 7,87,917 was worked out as unpaid and unadjusted in the CPC Limit. It is not disputed that the appellant had deposited a sum of Rs. 10 lacs which was obtained as CPC Limit. As per the Counsel for the Bank Rs. 5 lacs out of this was adjusted towards the interest which had accrued on account of PC interest. The amount thus remained yet to be adjusted was Rs. 5 lacs to which interest was added and thus the amount required to be repaid was calculated to be Rs. 7,87,917/-. To justify the adjustment in this manner, the Counsel for the respondent-Bank has invited my attention to the Hypothecation Agreement For Packing Credit Advance, copy of which is on the record. Clause 3(f) of this agreement is as under:
"(f) The Borrower further hereby authorizes the Bank to recover the PC interest as and when due by debiting his/her operative account, maintained at...... Branch of the Bank (No.....) and also undertakes that in case any debit of PC interest in such operative account results in overdrawing in that account, the Borrower shall clear that overdrawing together with interest as applicable to clean advances stipulated by the Bank in accordance with the rules and regulations framed by them without any demur."
Thus, the appellant borrowers had authorized the Bank to recover PC interest as and when due by debiting his/her operative account maintained at the branch. The borrowers also undertook that in case any debit of PC interest in such operative account results in overdrawing in that account, the borrowers shall clear the overdrawing together with interest as applicable to clean advances stipulated by the Bank in accordance with the rules and regulations framed by them without any demur.
The submissions made on behalf of the Bank that the shipment of software was not done is indicative from the fact that the appellant themselves had deposited a sum of Rs. 10 lacs, which would show that the appellants did not ship the gods and the amount remained unpaid. In response to the submission made on behalf of the Bank on the above noted remark, the Counsel for the appellants could only state that the appellants have not opened any temporary overdraft facility. For good reasons as recorded by the Tribunal below, this plea raised by the appellants cannot be accepted. In my view, the respondent-Bank has sufficiently explained the adjustment of the amount of Rs. 10 lacs which was statedly paid by the appellant towards CPC Limit. In view of Clause 3(f) of the Agreement, respondent-Bank would be justifying the adjusting of the amount towards interest as and when due by debiting the borrowers operative account maintained in the branch. That is what exactly has been done and hence I do not find any fault with the action of the Bank in claiming this amount due from the appellants.
The second submission made by the Counsel for the appellants is that the Bank was required to claim from ECGC, if any amount has remained unpaid out of the two bills which the Bank purchased. The plea by the appellants is that ECGC cover though was in the name of the appellant company, the original thereof was with the Bank and it was the Bank which was to make a claim. Copy of the ECGC cover is available on record and it clearly shows that it is in the name of Neural Magic Systems Ltd., E-156 Hansraj Sethi Marg, Kalkaji, New Delhi. Thus, this insurance cover was in the name of the appellant company. To show that it was for the Bank to claim ECGC cover in regard to post-shipment, which was insured up to Rs. 15 lacs, the Counsel has contended that the Bank had made a claim so far as the pre-shipment was concerned.
The Counsel for the Bank would submit that once the ECGC cover was in the name of the appellant company, the company alone was responsible to make a claim in this regard and it was not the responsibility of the Bank. The Counsel would also contend that even if that was to happen, this amount received could not have been adjusted to clear the outstanding dues by the appellants. The claim, if any, received from ECGC was required to be kept separately to be adjusted only at the end of the decision in regard to the liability. The Counsel would also make a reference to the letter written by the appellants. A particular reference is made to para 4 of the letter dated 16th August, 2002 written by the appellants to the Bank where it is recorded that the appellant did not have shipment policy of ECGC with adequate buyerwise limit. If is further stated that the appellants were unable to get ECGC cover for shipment as in this case no physical delivery of documents was involved they being software exporters. It is stated that the software is transferred electronically via leased line to the overseas customer and ECGC is not ready to offer limits on Delivery Acceptance-90 basis and CD terms, but only on Document Production terms. Accordingly, the appellants had requested the Bank to exempt them from ECGC cover requirement and disburse the FDB/FBE limits to them since all the buyers are having good track record with them and all payments are being regularly received. The Counsel for the appellants though, of course, would state that ECGC was not ready to offer limit on Delivery Acceptance but on Document Production terms only. Be that as it may, the Counsel would contend that still ECGC cover was available and the claim should have been made by the Bank. The answer by the Bank of course, is what has been recorded above that it was the responsibility of the appellants to make any claim. The Counsel for the appellants would also highlight that the Bank had disputed the letter in question and in this regard has made reference to the rejoinder filed by the Bank. The existence of the letter is not disputed by the appellants and the stand of the Bank is that though there was stipulation for ECGC cover for post-shipment finance, but the same was waived in view of this letter as there was no coverage by ECGC for post-shipment finance. The Bank would accordingly contend that the question of claim from the ECGC would not arise.
The Counsel for the appellant has made reference to the case of Corporation Bank v. Mehta Gems, Suit No. 453/1983 decided by the Bombay High Court on 15th June, 2010, to rebut the submission of the Bank that insurance cover is not available when the appellant has not exported any goods and that the defence based on ECGC policy is not available. The Court in the case of Corporation Bank (supra) found that the letter of sanction contained a reference to ECGC cover as terms and conditions of loan then why the claimant had remained silent about it. Court observed that it amounted to suppression of facts as it was not disclosed if the claim was lodged and then what was the outcome. In the instant case, there is no suppression of facts alleged and ECGC cover perhaps was not available as the facts would disclose. Even if available, the claim was to be pursued for refund of the amount recovered from the ECGC. This judgment may not be of much help of the appellants.
In view of what has been discussed above, I do not find any substance in both the submissions made by the Counsel for the appellants. Accordingly, I do not find any reason to interfere with the impugned order passed by the Tribunal below. The appeal is without any merit and therefore is dismissed.