O.A. No. 393 of 2001. Case: Central Bank of India Vs Prithvi Ispat (P) Ltd. and Ors.. Nagpur Debt Recovery Tribunals

Case Number:O.A. No. 393 of 2001
Party Name:Central Bank of India Vs Prithvi Ispat (P) Ltd. and Ors.
Counsel:For Appellant: M.D. Samel, Adv. and For Respondents: S.S. Panicker, Adv. for the Defendant Nos. 4 and 12, M.V. Dhareshwar, Adv. for the Defendant No. 17 and B.S. Prasad, Adv. for rest of the Defendants
Judges:K.J. Paratwar, Presiding Officer
Issue:Indian Contract Act - Sections 128, 133, 139 and 140; Debts Recovery Tribunal (Procedure) Rules, 1993 - Rule 10
Citation:II (2005) BC 214
Judgement Date:May 06, 2005
Court:Nagpur Debt Recovery Tribunals
 
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Judgment:

K.J. Paratwar, Presiding Officer

  1. This is an application for recovery of Rs. 8,93,86,852.41 from defendants 1 to 3, 15 and 16 with interest at 17.5% p.a. with quarterly rests. The amount is outstanding under three facilities as below:

    Cash Credit (Hyp) -- Rs. 5,29,03,500.31; Overdraft (Book Debts) -- Rs. 1,10,83,162/-; Co-acceptance of Bills invoked and letters of credit devolved -- Rs. 2,54,00,190.10.

    From out of the aforesaid amount, a sum of Rs. 2,04,14,940.67 along with interest as above is sought to be recovered from defendant Nos. 4, 5, 6, 9, 12 to 14 and Rs. 1,54,93,780.50 from defendant Nos. 7, 8, 10 and 11.

  2. The amounts are sought to be recovered by liquidating 1st defendant's hypothecated properties and mortgaged properties of defendant Nos. 1 to 3.

  3. The defendant No. 1, the borrower company is the applicant's constituent since from when it was partnership firm of defendant Nos. 2 and 3. The borrower (defendant No. 1) is a company since from 1994 of which defendant Nos. 2 and 3 are directors sued as guarantors along with defendant Nos. 15 and 16 and rest of the defendants as guarantors to a limited extent.

  4. In or about February, 1994, the defendant No. 1 took over by agreement dated 1st February, 1994 M/s. Mehta Steels Ltd. along with all assets and liabilities. The 1st defendant executed security documents namely D.P. Note, Deeds of hypothecation, etc. on 10th February, 1994 in favour of the Bank in respect of Demand Cash credit limit of Rs. 149 lakhs and Bank Guarantee upto Rs. 25 lakhs. This was secured by personal guarantee of defendant Nos. 4 to 7, 14, 2, 3 and 8 to 12 and registered mortgage by defendant No. 2. On or about 10th April, 1995 the applicant renewed and enhanced the facilities to become Cash Credit (hypothecation) -- Rs. 100 lakhs, Overdraft -- Rs. 50 lakhs, L/C. -- Rs. 50 lakhs and Bank Guarantee -- Rs. 25 lakhs. Defendant Nos. 2 to 6, 9 and 12 to 14 gave personal guarantees. The further security was equitable mortgage by deposit of title deeds of 2nd defendant's flat. The borrowers and guarantors executed usual security documents and letters of guarantee, as the case may be. The borrower availed of the facilities.

  5. On or about 27th November, 1997 the facilities were further revised to become Cash Credit (hypothecation) --Rs. 310 lakhs, Overdraft---Rs. 100 lakhs, L/c. -- Rs. 200 lakhs and Bank Guarantee -- Rs. 100 lakhs. The borrower executed D.P. Note and usual security documents while defendant Nos. 2, 3, 15 and 16 gave letters of guarantee. Defendant Nos. 2 and 3 deposited title deeds for creation of equitable mortgage of the property at Loha Oli. The defendant No. 1 availed of the facilities. In respect of the outstandings, the 1st defendant executed letters of acknowledgement on 1.7.97 and 28.7.98. The applicant had opened L/c at the 1st defendant's behest and was required to make payment against bills presented under the same. The defendant No. 1, however, did not make payment despite demands and notice. Therefore, this O.A.

  6. The 1st defendant resisted the O.A. by written statement at Ex. 23 which has been adopted by defendant Nos. 2, 3, 15 and 16 vide pursis at Ex. 24. At the outset, the formal objections about authority of the officer to file and verify the O.A., seeking plural remedies contrary to Rule 10 of DRT (Procedure) Rules, 1993 and mis-joinder of defendant Nos. 2 to 14 are taken up. The O.A. is also said to be barred by limitation. It is stated that defendant Nos. 2 and 14 are made unnecessary parties because the limit of Rs. 710 lakhs vide letter dated 23.10.97 was sanctioned only on personal guarantee of defendant Nos. 15 and 16. There is indeed no specific defence by these defendants.

  7. Defendant Nos. 4 to 14 in their common written statement (Ex. 29) have initially taken up all those contentions raised by aforesaid set of defendants. Their main defence is of novation and material variance of the contract of guarantee. It has been submitted that the sanction of facilities in 1997 amounts to novation of contract. This was without notice let alone to the answering defendants. The guarantors, therefore, got discharged. Dismissal of the O.A is sought for on said grounds.

  8. Defendant No. 17 vide written statement at Ex. 21 has contended that it is having 1st charge over the company's property and Bank's charge is 2nd.

  9. There is bulky evidence in this matter consisting of Claim Affidavit of Mr. D.S. Lahane, Officer of the Bank (Ex. 32); Counter affidavit of Mr...

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