Radhesh Sharma vs Canara Bank And Ors.

Ranjit Singh, J

The O.A. filed by the respondent-Bank for recovery of Rs. 33,88,046/- has been allowed along with costs and expenses and with interest @ 14% simple from the date of filing of the O.A. till realization. Aggrieved against the same, the appellant-guarantor has filed the present appeal. In this case, a partnership firm by the name of M/s. Precious Motor Cycle Company had approached the respondent-Bank for sanction of certain credit facilities for their business requirement. Initially, the Bank had sanctioned Secured Overdraft facility of Rs. 7 lac and Clean Demand Bill (CDB) limit of Rs. 1 lac. These facilities were renewed/enhanced to Rs. 12 lac and Rs. 1 lac respectively on 5.11.2002 against hypothecation of stocks of readymade, finished, semi-finished items of auto parts. Mr. Krishan Kumar Sharma (respondent No. 3) and Mr. Ramesh Kumar Sharma (respondent No. 4), the partners of the firm, executed various documents like pronote for Rs. 12 lac, request for overdraft facility, partnership letter, letter of renewal, link letter in respect of enhancement of credit limits, supplemental agreement and letter of undertaking, on 5.11.2002. These two partners along with three other persons, namely, Mr. Arun Sharma, Mr. Nitin Sharma and-Mr. Komal Kishore Sharma, stood as guarantors and executed personal and continuing guarantees in favour of the Bank.

To secure the credit facilities, respondent Nos. 4 to 7 offered collateral security of immovable property being X-1452 (Western Southern portion), Plot No. A-33, Gali Nos. 4 and 5, Rajgarh Colony, Delhi, measuring 100 sq.yds., in favour of the Bank by depositing the original title deed. This property mortgaged by respondents 4 to 7 was replaced with the property owned by respondent No. 3, which was built-up property X/1557/3, Plot No. 76-A, Gali No. 8, Rajgarh Colony, Delhi, measuring 55.66 sq.yds. This mortgage was created by deposit of title deed of the property on 29.1.2003.

The borrower partnership firm and respondent No. 3 again approached the Bank for substitution of the mortgaged property with another being built-up property No. X/1475, Old No. 331/48, Plot No. A-48, out of Khasra No. 128, Galli No. 6, Rajgarh Colony, Delhi, Village Ghondli, Illaqua Shahdara, P.S. Krishna Nagar, Delhi. This request was accepted and this property measuring 60 sq.yds. owned by the appellant was accepted in mortgage.

The aforesaid credit limits and lastly the Open Cash Credit limit was enhanced to Rs. 15 lac and Clean Demand Bill limit to Rs. 2 lac on 30.11.2005 on the existing terms and conditions and the primary collateral security already available with the Bank. When after availing the said facilities the borrower failed to comply with the terms and conditions, the account of the borrower was declared NPA on 30.9.2007. Respondent Nos. 3 and 4 being partners of the firm had acknowledged the liability in both the accounts and signed balance and security confirmation letter on 30.11.2005.

When the borrower failed to pay the dues despite numerous opportunities, the Bank initiated action under the provisions of the SARFAESI Act by issuing notice under Section 13(2) thereof to the borrower and guarantors on 20.12.2007. Action under Section 14 of the Act to take physical possession of the property was also initiated. Subsequently, the Bank filed the O.A. claiming the amount as already mentioned.

None had chosen to appear on behalf of respondent Nos. 3, 5, 6 and 7 despite service. Counsel had appeared for respondent No. 4 and the appellant to file two sets of written statements. The appellant and respondent No. 4 had raised certain general pleas. As per them, the Bank had misused the process of law and forged and fabricated the documents. It was urged that the loan was granted to an unregistered partnership firm and enhanced/renewed the same from time to time without their consent. The other pleas like O.A. was not filed by authorised/competent person, that they had not executed any security documents and that the Bank officials obtained their signatures on the blank documents and filled the same later on were also raised. Appellant and respondent No. 4 had also pleaded that they did not executed any personal guarantee or created/extended or confirmed any alleged mortgage of properties in favour of the Bank besides pleading that the O.A. was filed beyond the period of limitation. Their plea also was that the Bank had failed to protect the hypothecated stocks and accordingly they prayed for dismissing the O.A.

The Tribunal, after considering the pleadings and the evidence which was led, has allowed the claim of the Bank. The Counsel for the Bank initially had made a three-fold submission to challenge the impugned order. He would first submit that the appellant had given the guarantee for a sum of Rs. 25 lac which was over-allowed. The Counsel would also submit that a sum of Rs. 2,51,941/- was advanced as personal loan to the borrower, which was not for any business purpose and hence, the guarantee which he had offered would not cover this amount. The Counsel submits that the interest agreed was 13.5% and accordingly would plead that the interest charged by the Bank is not in terms of the agreed rate of interest.

As already noticed above, before filing the O.A. the Bank had initiated action under the SARFAESI Act, by issuing notice under Section 13(2) of the Act for recovery of an amount of Rs. 27 lac. The appellant filed S.A. to impugn the said notice and also the notice issued under Section 13(4) of the Act. When this S.A. was dismissed, the appellant had filed Appeal No. 191/2014 before this Tribunal. While disposing of the said appeal, it was noticed that the appellant had deposited a sum of Rs. 28 lac in all against the notice amount of Rs. 27 lac. The plea by the Counsel for the appellant was that the appellant had shown his bona fide to discharge the liability to save his residential property. Counsel had not raised any plea on merit, but only pleaded that the appellant was ready to discharge the entire liability. This Tribunal accordingly thought it appropriate to consider this request of the appellant.

Noticing that the appellant had deposited a sum of Rs. 28 lac against the demand of Rs. 27 lac, the plea to discharge the entire liability was considered. Counsel for the Bank had pointed out that the O.A. filed by the Bank was pending adjudication where the exact liability of the borrower would ultimately be determined. The appellant was a party to the O.A. and as such was in a position to plead that she had deposited Rs. 28 lac which were more than the amount demanded, where this fact can be considered. Granting this liberty to the appellant to plead this fact in the O.A., the appeal filed by the appellant was disposed of by observing that if any amount is still found due even after the payment of Rs. 28 lac, the appellant can either pay the same or can take any appropriate action in accordance with law. A direction was also issued not to dispossess the appellant from the residential property and the interim order passed in the S.A. was directed to continue during the pendency of the O.A. If any amount was still found due after decision of the O.A., the appellant was given liberty to discharge the same or if he has any grievance, then take appropriate action in accordance with law. That being the position, the present appeal is filed by the appellant to challenge the final decision in the O.A.

I have considered the pleas raised by the Counsel for the appellant. I have examined the documents and statement of account in detail. The guarantee agreement is on record. Initially, the appellant had given guarantee for an amount of Rs. 13 lac plus interest thereon. This guarantee was later enhanced to Rs. 17 lac. Subsequently, the appellant had even given guarantee to pay a sum of Rs. 25 lac which could be sanctioned to the partnership firm. The plea that this amount has been exceeded would not mean much. The statement of account would show that the partnership firm) had basically enjoyed the overdraft facility within the range of Rs. 25 lac approx. The Counsel for the appellant is apparently ignoring the fact that the appellant had given guarantee for the overdraft of Rs. 25 lac with interest accruing thereon. Appellant accordingly cannot appropriately raise the challenge on this count.

Interest agreed to be initially was at 15.10% p.a. above the ongoing PLR with minimum of 2% p.a. from the date of demand by the Bank upon the guarantors for payment and expenses and other charges. The Counsel for the respondent-Bank has taken me through the statement of account as well as through the claim in the O.A. where an amount of Rs. 33 lac has been claimed. I do not find any substance in the submission made by the Counsel for the appellant that interest charged is not as per agreed rates.

The Counsel for the respondent-Bank is also justified in submitting that no plea in this regard was raised in the reply filed by the appellant. The stand of the appellant and his father had been that they had not even signed guarantee deeds and their signatures are the forged ones. Counsel accordingly would point out to the change in stand of the appellant now in this appeal.

Faced with this difficult situation, the Counsel for the appellant has relented and would plead for some concession in the interest as has been granted by the Tribunal below on the claim allowed. The Tribunal below has allowed the claim of the Bank with interest @ 14% simple from the date of filing of the O.A. till realization. Counsel pleads for allowing the claim with interest @ 9.5% p.a. simple. That would be on the lower side and this plea of the appellant cannot be accepted. The appellant, however, would submit that he is a guarantor only and had deposited a substantial amount of Rs. 28 lac during the proceedings in the S.A. where he had also expressed his willingness to discharge the liability. Since the liability has now been determined, he still want to discharge the same for which he prays for grant of some concession in the rate of interest as granted by the Tribunal below. Counsel submits that the Tribunal has taken note of the payment made by him during the pendency of the S.A. The Counsel for the Bank has nothing much to say in this regard.

In view of the fact that the appellant had come forward to make payment and is seen suffering from the consequences of the interim order which he had obtained in the S.A. which he has enjoyed for a considerable period and ultimately, has led to enhanced liability, a case for grant of some concession in the rate of interest is made out. The Bank has already claimed the amount with interest agreed, which varied from 14% with quarterly rests to 17.5% with quarterly rests. Taking all these facts into consideration, I am of the view that some concession in the rate of interest as allowed by the Tribunal below is made out. In my view, interest 11% p.a. from the date of filing of the O.A. till realization of the amount would be sufficient to meet the ends of justice. The appeal, otherwise, deserves to be dismissed, except for modification in the rate of interest as allowed by the Tribunal below. The appellant would now discharge the liability as determined by the Tribunal below with interest @ 11% p.a. simple from the date of filing of the OA till realization. But for this, the appeal otherwise would stand dismissed.