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Andhra Pradesh High Court
Judges : G.V.SEETHAPATHY
State Bank of India, King Kothi Branch Hyderabad, rep. By its Branch Manager - Appellant
Versus
Zeenath X-ray ECG Clinic, rep. By its Managing Partner - Respondent
Decided On : 04/16/2007
Case No : C.C.C. Appeal Suit No.190 of 2002
Civil Procedure Code, 1908 – Schedule property - Agreement for grant of medium term advance - Appellant filed suit with following averments – On application of 2nd defendant, who is Managing partner of first defendant term loan of was sanctioned by plaintiff bank for business purpose on hypothecation of stocks and machinery and personal guarantees offered by defendants 2 to 8 apart from mortgage of plaint schedule property belonging to 8 defendants have executed general agreement for grant of medium term advance ancillary agreement and guarantee agreement for small industrial advances apart, 8th defendant also created equitable mortgage in respect of his house property as collateral security for loan – Defendants also executed a letter of confirmation of balance on spite of several demands defendants did not repay loan –2nd defendant by his letters acknowledged the availing of loan and requested for waiver of substantial amount of interest – Plaintiff bank got issued a legal notice on three occasions but defendants did not repay debt – Defendants 1 to 4, 6 and 7 filed written statement admitting that 2nd defendant availed loan amount on behalf of first defendant firm and also executed suit documents except execution of deed of guarantee by defendants 3, 4 and 6 – It is further pleaded that 8th defendant never created any equitable mortgage in respect of plaint schedule house property and that plaintiff bank ascertained the financial status of 8th defendant and in that connection, 2nd defendant, who is related to 8th defendant gave original sale deed to plaintiff for purpose of verification and return plaintiff bank, however, failed to return the same and treated it as an equitable mortgage, which in fact was never created – Held, In present case there is no evidence to show that 8th defendant handed over his title deed Ex.A.29 to concerned official of plaintiff bank at time of sanction of loan by way of security and with an intention to create equitable mortgage thereby. PW.1 admittedly had no personal knowledge of transaction as he joined plaintiff bank much later in 2001 after filing of suit – Concerned official of bank who was responsible for the sanction of the loan and who is said to have received title deed is not examined to show that 8th defendant in fact personally handed over title deed expressing his intention to create mortgage by deposit – There is nothing on record show that 8th defendant went to the bank on along with 2nd defendant – According to defendants, 8th defendant gave title deed to 2nd defendant to enable him to furnish same to plaintiff bank as desired by them for purpose of verifying solvency of 8th defendant, who figured as a guarantor said plea is plausible considering fact that 8th defendant in fact stood as guarantor and there is no document executed by him expressing his intention of creating a mortgage by deposit of title deed – In fact, the plaintiff does not refute the evidence of DWs.1 and 2 to effect that 8th defendant gave the title deed to 2nd defendant and that 2nd defendant furnished the same to the bank, as no evidence in rebuttal is adduced evidence on record would only show that 2nd defendant furnished title deed to bank 2nd defendant cannot offer to create a mortgage in respect of property belonging to 8th defendant intention with which document is furnished is essence of transaction expression of such intention on part of 8th defendant is not discernible from evidence on record – Appeal is dismissed.
This appeal is directed against the judgment and decree dated 15.04.2002 in OS No.90 of 1996 on the file of the Court of I Senior Civil Judge, City Civil Courts, Hyderabad, wherein the suit filed by the appellant herein for recovery of a sum of Rs.3,48,533/- was dismissed with costs.
2. The appellant filed the suit with the following averments: On application of the 2nd defendant, who is the Managing partner of first defendant, term loan of Rs.2,30,000/- was sanctioned by the plaintiff bank for business purpose, on hypothecation of stocks and machinery and personal guarantees offered by the defendants 2 to 8 apart from mortgage of the plaint schedule property belonging to 8th defendant. The defendants have executed general agreement for grant of medium term advance on 31.3.1984, ancillary agreement dated 31.3.1985, and guarantee agreement for small industrial advances dated 31.3.1984. That apart, 8th defendant also created equitable mortgage in respect of his house property as collateral security for the loan. The defendants also executed a letter of confirmation of balance on 6.1.1988, 30.09.1989 and revival letters on 30.09.1986 and 30.08.1989. In spite of several demands, the defendants did not repay the loan. The 2nd defendant by his letters acknowledged the availing of loan and requested for waiver of substantial amount of interest. The plaintiff bank got issued a legal notice on three occasions, but the defendants did not repay the debt.
3. The defendants 1 to 4, 6 and 7 filed written statement admitting that the 2nd defendant availed the loan amount on behalf of first defendant firm and also executed the suit documents except the execution of deed of guarantee by defendants 3, 4 and 6. It is further pleaded that 8th defendant never created any equitable mortgage in respect of plaint schedule house property and that the plaintiff bank ascertained the financial status of 8th defendant and in that connection, 2nd defendant, who is related to 8th defendant gave original sale deed dated. 6.2.1978 to the plaintiff for the purpose of verification and return. The plaintiff bank, however, failed to return the same and treated it as an equitable mortgage, which in fact was never created. The defendants further pleaded that the 2nd defendant has repaid the entire principal amount and major portion of interest by March 1988. The industry became sick and it was intimated to the plaintiff. Except small amount towards interest, the rest of the debt was discharged. The plaintiff is not entitled to claim interest at 19% per annum with quarterly rests.
4. The 8th defendant filed separate written statement contending that he never created any equitable mortgage of the plaint schedule house property belonging to him for the suit loan and the sale deed was given to the bank for the purpose of verification of his financial capacity to stand as a guarantor. He executed guarantee agreement in 1984 and revising the same in 1986 and 1989 and thereafter there was no revival of the guarantee and as such the suit is barred by time against him.
5. The suit against 5th defendant was dismissed.
6. Basing on the pleadings, the trial court framed the following issues for trial.
1. Whether the suit claim is barred by time?
2. Whether the interest claimed is usurious and penal?
3. Whether the defendant No.8 deposited his title deeds with an intention to create equitable mortgage?
4. Whether the suit amount is correct and plaintiff is entitled to decree asprayed for?
5. Whether the defendants are not liable for the suit amount?
6. Whether the defendants are entitled to instalment decree? If so at what rate?
7. To what relief?
7. PW.1 was examined and Exs.A.1 to A.29 were marked on behalf of the plaintiff. DWs.1 and 2 were examined, but no documents were marked on behalf of defendants.
8. On consideration of the evidence on record, the trial Court gave finding on issue No.3 that the plaintiff failed to prove creation of equitable mortgage by 8th defendant in
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