P.S. Aruchami vs Canara Bank

V. Ramkumar, J.—The defendant in O.S.No.339 of 1992 on the file of the Sub Court, Palakkad is the appellant in this appeal. The said suit was one for realisation of a sum of Rs. 68,260/-.

The case of the plaintiff can be summarised as follows:

Pursuant to an application for agricultural short term loan for Rs. 44,100/- submitted to the plaintiff-bank by the defendant for the purpose of digging well, construction of pump shed and for purchase of pumpset and motor and other accessories for his agricultural operations in the agricultural lands belonging to the defendant situated at Pudussery village in Palakkad Taluk, the plaintiff sanctioned the said loan as per Loan No. ALFD 2/87. To secure repayment of the above amounts covered under the above loan, the defendant had on 6.3.1987 executed a Demand Promissory Note for Rs. 44,100/- in favour of the plaintiff promising to repay the loan with interest at 10% per annum with compounded quarterly rests. The defendant had also executed Ext.A2 take delivery letter dated 6.3.1987 in favour of the plaintiff-bank accepting the terms and conditions contained therein and also agreeing to repay the loan in 8 yearly instalments together with interest as and when due. The defendant had further executed Ext.A3 Memorandum of Agreement in favour of the plaintiff accepting the terms and conditions contained therein and hypothecating the crops raised or to be raised from time to time over the properties described thereunder. As per the terms and conditions of the loan as agreed to by the defendant, the plaintiff is entitled to recover the entire dues in lump in case of default in the matter of re-payment. By way of further security for the loan, the defendant had on 13.2.87 deposited the title deeds described in the plaint A Schedule relating to his immovable properties in Schedule B with the plaintiff-bank in its Sultanpet Branch, Palakkad Taluk with intent to create a mortgage thereon in favour of the plaintiff for the purpose of securing repayment of money due from the defendant to the plaintiff-bank. The defendant, on 14.02.1987, executed a letter evidencing deposit of the said title deeds along with two lists showing the list of title deeds deposited and the description of the immovable properties mortgaged in favour of the plaintiff. Thereby the defendant had created a charge over the Plaint B Schedule immovable properties. The defendant has defaulted the payment of the instalments due to the plaintiff and has thereby violated the terms and conditions of Ext.A3 Memorandum of Agreement. As per Ext.A4 Acknowledgment of Debt and Security dated 20.11.89, the defendant executed a letter acknowledging the debt and security in favour of the plaintiff in respect of the aforesaid loan. As per Ext.A5 account maintained by the plaintiff in respect of the above transaction the total amount outstanding as on 28.03.1992 was Rs. 65,125.20. The defendant is liable to pay subsequent interest at the revised rate of Rs. 16.5% per annum from 28.3.1992. In spite of several demands both in person and by registered letters made by the plaintiff, the defendant did not settle the accounts. Hence the suit. The defendant had been given relief to the extent of Rs. 10,000/- under the Agricultural Rural and Debt Relief Scheme 1990 (ARDR Scheme for short) and the amount claimed in the suit is after giving credit to all the amounts remitted by the defendant including the relief given under the ARDR Scheme. The plaintiff is also entitled to future interest also at the revised rate of Rs. 16.5% per annum. The plaintiff is also entitled to a charged decree by sale of Plaint B Schedule mortgaged properties in favour of the plaintiff. The cause of action for the suit arose on 13.2.1987 when the defendant deposited the title deeds with the Sultanpet Branch of the plaintiff-bank and on 14.2.1987 when the defendant executed a letter evidencing deposit of the said title deeds and on 16.3.1987 when the defendant executed the Demand Promissory Note, take delivery letter and Memorandum of Agreement in favour of the plaintiff and on 20.11.1989, when the defendant executed the letter of acknowledgment of debt and security in favour of the plaintiff. Hence the suit.

In the written statement filed by the defendant, he admitted the loan advanced with the stipulation to pay interest at the rate of 10 % per annum. His case was that since the loan was to be repaid in yearly instalments extending up to 8 years, the suit filed in the year 1992 was pre-mature. He also disputed the interest rate of 16.5% claimed. He contended that the deduction of Rs. 5,606/- towards the excess amount under the ARDR Scheme was not correct and that the suit filed before the expiry of the period of loan was not maintainable.

The court below framed two issues for trial. No oral evidence was adduced by the plaintiff. Exts. A1 to A5 on the side of the plaintiff and Ext.B1 to B4 on the side of the defendant were marked on consent. The learned Sub Judge, as per judgment and decree dated 13.10.94, after accepting an affidavit dated 26.10.94 from the plaintiff to the effect that out of total sum of Rs. 10,000/- under the ARDR Scheme, a sum of Rs. 4,394/- alone was given credit to by the plaintiff- bank, a sum of Rs. 2984/- was to be adjusted towards the loan which the defendant had taken from the Kanjicode Service Co-operative Bank and a sum of Rs,2622/- had to be adjusted towards the loan which he had taken from the Palghat District Co-operative Bank, Menonpara, decreed the suit for Rs. 68,260/- with costs and future interest at the rate of Rs. 12% per annum as against 16.5% claimed by the plaintiff. It is the said decree which is assailed in this appeal by the defendant.

The learned Counsel for the appellant/defendant reiterated the contentions and grounds raised in the memorandum of appeal. The main submissions were as follows:

When the loan amount was to be discharged in yearly instalments extending up to 8 years, the plaintiff could take steps only for recovery of the defaulted instalments and not the entire loan amount. The suit filed for realisation of the entire loan amount even before the expiry of 8 years was premature and therefore not maintainable. The court below went wrong in apportioning the relief under ARDR Scheme between two other banks besides the plaintiff-bank and giving credit only to Rs. 4,394/- towards the loan amount in question. The affidavit filed in support of the said Scheme was filed only a few days prior to the disposal of the suit and it was accepted by the court below behind the back of the defendant. The court below also went wrong in permitting the plaintiff to create an equitable mortgage by deposit of title deeds regarding the Plaint B Schedule immovable properties belonging to the defendant in favour of the Sultanpet Branch of the Canara Bank, since that branch had nothing to do with the loan transaction in question and no equitable mortgage could be created towards the loan availed of by the defendant from the plaintiff-bank which is the Pudusseri branch of the Canara Bank.

I am afraid that I cannot agree with the above submissions in their entirety. As for the contention that the suit was filed prematurely even before the expiry of 8 years and that the plaintiff can recover only the defaulted instalments and not the entire loan amount, Clause 6 of Ext.A3 which has been admittedly executed by the defendant reads as follows:

That in the event of the Borrower committing breach of any of the terms and conditions stipulated by the Bank or mis-utilisation, non-utilisation or only partial utilisation of the proceeds of the loan, notwithstanding anything herein contained and notwithstanding the stipulations if any that the Borrower is allowed to pay the amounts due in instalments; the bank shall have right to demand payment of entire liability forthwith and to take such other steps as may be necessary to recover the same by enforcing the securities.

The above clause is to the effect that in the event of the defendant/borrower committed breach of any of the terms and conditions stipulated by the bank, the bank shall have the right to have the payment of the entire liability forthwith and to take such other steps as may be necessary to recover the same by enforcing the securities. Yearly instalments payable was Rs. 5,500/- Admittedly, the defendant was a defaulter. If so, Clause 6 of Ext.A3 was squarely attracted, entitling the bank to recover the entire amount in lump by enforcing the securities. Hence it cannot be said that the suit was premature.

With regard to the equitable mortgage created in favour of the Sultanpet branch of Canara Bank, it was specifically pleaded in paragraph 3 of the plaint. No exception whatsoever has been raised in the written statement with regard to paragraph 3 of the plaint. That was a matter which called for specific denial. In the absence of a specific denial in the written statement, the defendant cannot be heard to say that the bank was not entitled to create any equitable mortgage of plaint B Schedule properties in favour of the Sulthanpet branch of the Canara Bank by way of security for the enforcement of the land transaction in question. The absence of such denial in the written statement should be treated as an admission. An admitted fact need not be proved in view of Section 58 of the Evidence Act.

Now coming to the relief of Rs. 10,000/- which the defendant was entitled under the ARDR Scheme, the plaintiff having given credit for the entire amount of Rs. 10,000/- in Ext.A5 account maintained by the plaintiff was not entitled to apportion the said amount between the plaintiff and two other banks from which the defendant had allegedly taken loan. After apportioning a sum of Rs. 2,984/- towards the Kanjikode Service Co-operative Bank, another sum of Rs. 2,622/- towards the Palghat District Co-operative Bank, Menonpara, the plaintiff bank was giving a credit of Rs. 4,394/- only towards the loan in question. A sum of Rs. 5606/- was debited to the defendant''s account. This was resorted to by the plaintiff in the form of an affidavit filed on 26.10.94 enclosing a letter dated 24.10.94 from the Kanjikode Service Co-op.Bank Ltd. In the first place, a copy of the affidavit was not furnished to the defendant or his Counsel and the defendant was not given an opportunity of confirming or denying the contents of the affidavit. The said affidavit was accepted by the court below behind the back of the defendant. That was not only illegal but was also in violation of the principles of natural justice. Hence, the court below went wrong in permitting the bank to debit the sum of Rs. 5,606/- in Ext.A5 statement of account. The defendant was entitled to the full credit of Rs. 10,000/- by way of relief towards the ARDR Scheme. Whether the defendant would be entitled to any such reliefs with regard to the loans availed of by him from two other banks, was not an issue could have been adjudicated in the present suit especially in the manner in which it was done.

The result of the foregoing discussion is that the decree passed by the court below to the extent that it has upheld the debit of Rs. 5,606/- in the defendant''s account towards the loan transaction is liable to be interfered with. The defendant is held entitled to the full relief of Rs. 10,000/- under the ARDR Scheme and the account will stand rectified to that extent. The bank will be entitled to execute the decree as per a revised statement of accounts giving full credit of Rs,10,000/- by way of relief under ARDR Scheme and calculating interest at the rate of Rs. 12% on the amount due. The Appeal is allowed in part to the limit extended mentioned above. Dated this the 2nd day of June, 2009.