T.A. 75 of 2002. Case: Central Bank of India Vs Sreehari Packaging Industries and Ors.. Kolkatta Debt Recovery Tribunals

Case NumberT.A. 75 of 2002
CounselFor Appellant: Anjan Chatterjee, Adv. led by Udayan Sen, Adv. and For Respondents: Aruna Ghosh, Adv.
JudgesD.C. Thakur, Presiding Officer
IssueRecovery of Debts Due to Banks and Financial Institutions Act, 1993 - Section 19 and 19(1); Code of Civil Procedure, 1908 (CPC) - Section 19 - Order 34, Rule 4; Banking Regulation Act, 1949 - Section 21A; Specific Relief Act; Transfer of Property Act, 1882 - Section 69
CitationII (2004) BC 129
Judgement DateMay 22, 2003
CourtKolkatta Debt Recovery Tribunals


D.C. Thakur, Presiding Officer

  1. The final Order and the judgment are being passed by this Tribunal after giving the/opportunities of being heard to both the applicant Bank and the defendants (numbering about three times after its transfer to this Tribunal) in connection with an application preferred by the applicant Bank under Sub-section (1) of Section 19 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 on September 13, 1994 before the learned Transferring Tribunal against the three defendants for an order to be passed by the said Tribunal (a) for a certificate and/or a Decree for a sum of Rs. 12,87,335.00 p. jointly and severally against those defendants, (b) also for an order for interest on the said sum from September 13, 1994 (being the date of preferring the said application) till filing of the application, interim interest and interest on judgment at the agreed rate of 19.75% per annum with monthly rest, (c) a declaration of the properties mentioned in Schedule 'A' (page 15 of the above application) dealing with all tangible, movable properties, such as building, machinery products, stocks in trade, finished goods, raw materials of borrowers/defendants stored in the premises or godown of those borrowers at 1/1, Umakanta Sen Lane, Paikpara, P.S. Chitpur, Kolkata-700030, by public auction or by private treaty with liberty to be granted to the applicant Bank to appropriate the net sale profits thereto towards the utmost satisfaction of its claim as demonstrated in the above application, (d) also for a decree for sale of the immovable property mentioned in para 2 of the Schedule (B) (pages 15,16), and (e) also for a decree under Rule 4 of Order XXXIV of the first Schedule to the Code of Civil Procedure, 1908 in Form No. 5A of Appendix 'D' to the First Schedule thereto or in any other form, as to which the said learned Tribunal might seem fit and proper in respect of the said property, mentioned in the said para of the said Schedule and other interim reliefs. The background behind making such an application may be shortly stated below:

    The defendant No. 1 is a partnership firm consisting of the two constituent partners who are none but the defendant Nos. 2 and 3. The said defendant partnership firm used to carry on business as the manufacturer of paper, corrugated rolls and sheets from the office premises of itself being situate at 24, Netaji Subash Road, Kolkata-700001, falling within the jurisdiction of the said Learned Transferring Tribunal. The above kind of paper, corrugated rolls and sheets were manufactured by itself in the factory premises being situated at 1/1, Umakanta Sen Lane, Paikpara, P.S. Chitpur, Kolkata-700030. Besides the above feature of itself, the said defendant company was further a constituent of the applicant Bank since 1983. In its application, which was in fact made through its above partners, for being served with the financial assistance needed for the purpose of carrying out the business in the field of paper corrugated rolls and sheets, it made an appeal to the applicant Bank which was sanctioned by the latter on March 26, 1984 on the basis of a cash credit open loan upto the limit of Rs. 3 lakhs and as security for repayment of the dues in the said cash credit open loan account together with its accrued interest--

    (i) For such purpose, April 2, 1984 (which has been mentioned as the day and date both in the said application as well as in the evidence -on-affidavit filed by Shri Sumit Kumar Banerjee on September 7, 1998 before the said Tribunal) is the relevant day and date, because on such date the defendant Nos. 2 and 3 executed on behalf of the defendant No. 1 four kinds of documents; of such ones the document No. 1 was Demand Promissory Note containing "On demand we jointly and severally promise to pay the applicant Bank an order of the sum of Rs. 4 lakhs together with the interest thereon from date at the rate of 161/2 % per annum with monthly rests for value received" which was no doubt executed by the defendant Nos. 2 and 3. The reason why the defendant Nos. 2 and 3 have been shown as the guarantors shall be revealed from their Latter of Guarantee being written to the applicant Bank. On the basis of such execution of four documents all being the commercial documents, the defendant No. 1 was sanctioned a limit of cash credit upto Rs. 3 lakhs.

    (ii) For the business purpose and at the further request jointly made by the defendants, the said limit was enhanced to Rs. 5 lakhs and was sanctioned on May 14, 1985, for the purpose of which the defendant Nos. 2 and 3 further executed three kinds of documents including the Latter of Continuity within the meaning of Section 129 reading like--

    'A guarantee which extends to a series of transactions is called a "continuing guarantee" '.

    and Section 130 of the Indian Contract Act, 1872 (IX of 1872) laying down the following:

    'A continuing guarantee may at any time be revoked by the surety, as to future transactions, by notice to the creditor'.

    In the commercial document like "Demand Promissory Note" for a sum of Rs. 5 lakhs the same rate of interest that is, 161/2% per annum was agreed upon by the contracting parties.

    (iii) With the progress of its business in the field of manufacture of paper and corrugated rolls and sheets, all the defendants felt the necessity of the further enhancement of the said limit to Rs. 5.50 lakhs on March 17, 1988, the limit was enhanced to the amount, mentioned above and the limit was also sanctioned on March 17, 1988 on which date there were executed another four kinds of commercial documents. In the commercial document like 'Demand Promissory Note' for Rs. 5.50 lakhs dated March 17, 1988 the agreed rate of interest was interestingly at 15% per annum.

    (iv) The cash credit open loan, which was sanctioned on March 26, 1984 for a sum of Rs. 3 lakhs, met for the third time its enhancement and its merging with the latter enhanced amount which was in fact enhanced from Rs. 5,50,000/- to Rs. 6,13,800/-. On March 15, 1991, there were further executed the commercial documents numbering about four in the 'Demand Promissory Note' for a sum of Rs. 6,13,800/-, the defendants voluntarily agreed to pay an interest to accrue on the sum of Rs. 6,13,800/- which was not less than 19%. The said 'Demand Promissory Note' dated March 15, 1991 did bear the signatures of defendant Nos. 2 and 3 who are further being described as the guarantors. As the business in paper and corrugated rolls and sheets of itself spread extensively, the further enhancement of Rs. 6,13,800/- was felt to be inevitable necessary.

    (v) Accordingly, at the request of the defendants the said limit was enhanced by the applicant Bank to Rs. 8,87,840.91 p. and the said enhanced amount was sanctioned to be enjoyed by the defendants. On March 23, 1993, the 'Demand Promissory Note' for Rs. 8,88,525.91 p. was executed jointly by the defendant Nos. 2 and 3. In the said 'Demand Promissory Note' the defendants voluntarily consented in giving an interest of 19.75% per annum over Reserve Bank of India rate on the said sum to the applicant Bank. So far as the last enhanced amount of Rs. 8,87,840.91 p. is concerned, there were executed on several days and dates different commercial documents amongst which may be mentioned one latter being written by late Sitanath Pal, the husband of defendant No. 2 and the father of the defendant Nos. 3 and 4 and the defendant No. 2 to the Branch Manager of the said Bank; the subject-matter of which was clearly meant for the creation of an equitable mortgage by way of depositing with the mortgagee Bank one title deed (though in xerox form) pertaining to house/landed properties against the cash credit loan/term loan sanctioned to the defendant No. 1.

    In the said letter it was expressly declared in the following words:

    The following Title deeds owned by me/us have been deposited to you on 15.7.1983 against the C/C Loan/Term Loan granted to M/s. The Pioneer Papers and Pulp Private Ltd. and A/c. Shree Hari Packaging Industries.

    Kindly acknowledge receipt of the same. Thanking you.

  2. On April 30, 1980, late Sitanath Pal and the defendant Nos. 2 and 4 declared in clear and equivocal words that the land, building, machinery, stocks, outstandings and other assests of the Company were free from any encumbrance whatsoever and on the strength of the said express declaration, the applicant Bank was allowing them Loan/Overdraft/Cash Credit and other facilities; and for consideration of enjoyment of such facilities granted from time to time to themselves by the applicant Bank they did hereby undertake not to create any charge or encumbrances on any of the aforesaid assets of the Company by way of pledge or mortgage or issue of debentures or by any means whatsoever in favour of any third parties without obtaining the prior permission in writing from the Bank so long as the facilities enjoyed by themselves surely were continued to be given to them by the Bank.

  3. The enjoyment of cash credit loan facility to the extent of Rs. 3 lakhs ended in for an amount of Rs. 8,87,840.90 p. The same may be made evidently clear from the balance confirmation made on September 30, 1992 jointly by the defendant Nos. 2 and 3 for a sum of Rs. 8,87,760.31 p. including interest. But the above ongoing dealings and transactions between the applicant Bank and the defendant No. 1 started to become extremely unsatisfactory from the year 1988 which did take place due to the non-observance by the latter of the terms and conditions of the said sanction, as stipulated for the enjoyment and the irregular operation of the said account, the reasons of which are still remaining unknown to the applicant Bank has clearly stated the above facts at page 11 of the application filed on September 13, 1994 giving rise to the original application No. 67 of 1994 and at page 4 of the evidence-on-affidavit filed on its behalf. The last...

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