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High Court Of Delhi
STATE BANK OF INDIA - Appellant
Versus
DAMAODER NATH AND BROTHER - Respondent
Suit 872 of 1980
Decided On : 09/23/1997
STATE BANK OF INDIA V. INDIAN CLOTHING COMPANY - BANKING - STATE BANK OF INDIA ACT, 1955 - SECTIONS 76, 77 - BANKING REGULATIONS - CASH CREDIT FACILITIES - GUARANTEE - EQUITABLE MORTGAGE - DISHONOUR OF EXPORT BILL - LIABILITY OF GUARANTOR - ASSIGNMENT OF INSURANCE POLICY - EXPORT CREDIT GUARANTEE CORPORATION - DEPOSIT INSURANCE AND CREDIT GUARANTEE CORPORATION - CLAIM LODGEMENT - LIABILITY OF BANK - INTERPRETATION OF AGREEMENTS AND DOCUMENTS.
Fact of the Case:
Plaintiff, State Bank of India, filed a suit against defendants, Indian Clothing Company and its guarantor, for recovery of Rs. 1,19,112.00 with interest. The defendants had availed various cash credit facilities from the plaintiff and had executed agreements, demand promissory notes, and created an equitable mortgage as security. The defendants claimed that the loan was given against an export bill covered by an Export Credit Guarantee Corporation (ECGC) insurance policy, and that the plaintiff failed to lodge a claim with ECGC, absolving their liability. The plaintiff denied the assignment of the policy and asserted that it was the defendants' responsibility to approach ECGC.
Finding of the Court:
1. The suit was instituted by a duly authorized person, and the plaint was signed and verified as per the State Bank of India General Regulations and notification. 2. The amounts claimed by the plaintiff were proved to be due from the defendants based on agreements, demand promissory notes, and statements of account. 3. The defendants' plea that the plaintiff's failure to lodge a claim with ECGC absolved their liability was rejected. The court held that the assignment of the policy was not proved, and it was the defendants' responsibility to approach ECGC. 4. The guarantor was held equally liable as the principal debtor based on the executed agreements and demand promissory notes. 5. A preliminary decree was passed in favor of the plaintiff for Rs. 1,19,112.00 with costs, pendants lite, and future interest at 10% per annum from the date of institution of the suit.
Issues: 1. Whether the suit was instituted by a duly authorized person and the plaint was signed and verified as per regulations. 2. The amounts due to the plaintiff under each of the three accounts mentioned in the plaint. 3. The effect of the dishonor of the export bill insured with ECGC. 4. Whether the liability of the defendants was absolved due to the insurance. 5. The extent of the guarantor's liability. 6. Whether the defendants were entitled to set off and avoid court fees on the amount claimed. 7. The amount to which the plaintiff was entitled. 8. Whether the defendants were entitled to any counterclaim.
Ratio Decidendi: 1. The court relied on the State Bank of India General Regulations and notification to establish the authority of the person who signed and verified the plaint. 2. The court analyzed the agreements, demand promissory notes, and statements of account to determine the amounts due to the plaintiff. 3. The court interpreted the agreements and documents to conclude that the defendants' liability was not absolved due to the plaintiff's failure to lodge a claim with ECGC. 4. The court held the guarantor equally liable as the principal debtor based on the executed agreements and demand promissory notes.
Final Decision: Preliminary decree in favor of the plaintiff for Rs. 1,19,112.00 with costs, pendants lite, and future interest at 10% per annum from the date of institution of the suit. Defendants were allowed six months to make payment, failing which the plaintiff could seek a final decree.
( 1 ) THIS is a suit filed by the plaintiff for recovery of Rs. 1,19,112. 00 against the defendants with pendants lite and future interest.
( 2 ) THE plaintiff is a Statutory Corporation and has been incorporated constituted and established by the State Bank of India Act, 1955 (Act, No. 23 or 1955) and has its Central officer at Bombay. It has local Head Offices at Bombay, Calcutta, Madras Delhi and other places. It also maintenance branches at various places including one Branch at Daryaganj. Shri Ashok Kumar Jain who is the Principal Officer and Branch Manager of the plaintiff is authorised to file the present suit and to sign and verify the plaint on behalf of the plaintiff under Statutory Regulation Nos. 76 and 77 of the State Bank of India General Regulations, 1955 and the notification issued thereunder.
( 3 ) DEFENDANT No. 1 is the sole proprietor of M/s. Indian Clothing Company and was carrying on the business of manufacturing ready-made garments. Defendant No. 2 is the guarantor and has also created equitable mortgage in favour of the plaintiff in respect of her immovable property mentioned in Schedule A of the plaint as collateral security for advance made by the plaintiff to defendant No. 1.
( 4 ) IT is alleged that defendant No. 1. approached the plaintiff for the grant of Certain cash credit facilities and in consideration of the plaintiff granting to defendant no. 1. cash credit facility known as "cash Credit (Special Hypothecation) Facility" For Rs. 50. 000. 00 -
(A) the Defendants executed in favour of the plaintiff an Agreement for Hypothecation and Guarantee dated 12th January 1978 agreeing to hypothecate to the plaintiff the whole of defendant no. 1 s stocks and further agreeing to pay interest at the rate of 2% below the State Bank of India Advance Rate with minimum 12% per annum; (b) Defendants no. 1 also executed in favour of defendant no. 2 a Demand Promissory Note dated 12th January 1978 for Rs. 50,000. 00 - with interest at the rate of 12% below the State Bank of India Advance Rate with minimum 12% per annum and defendant no. 2 endorsed the said Demand Promissory Note in favour of the plaintiff. The said Demand Promissory Note was delivered by the defendants to the plaintiff along with a D. P. Note Delivery Letter of date; (c) Defendant no. 2 also executed in favour of the plaintiff an Agreement of Guaranteed dated 12th January 1978 for Rs. 50,000. 00 - with interests, as stated in the Agreement for Hypothecation and Guarantee.
( 5 ) IT is further alleged that defendant no. 1 started availing of the said facility by operating the said account on and from 12th January, 1978 and on that day defendant no. 2 delivered to and deposited with the plaintiff Title Deeds of her immovable property admeasuring 130sq. yards. (28"x42") out of Khasra No. 5121 208, situated at Village Moujpur, Illaqa Shadra, Delhi with Intention to create an equitable mortgage in favour, of the plaintiff as Collateral Security for the advances made by the plaintiff to defendant no. 1 as stated in Schedule a hereinunder.
( 6 ) THEREAFTER, in consideration of the plaintiff agreeing to grant to defendant no. 1 another Cash Credit Facility known as Cash Credit (Special) Contingency) Facility" for Rs. 5,000. 00 -, defendant no. 1 executed a Demand Promissory Note for Rs. 5,000. 00 dated 23rd February" 1978 in favour of defendant no. 2 and defendant no. 2 endorsed the Demand Promissory Note in favour of the plaintiff. The said Dimand Promissory Note was also delivered by the defendants along with a D. P. Note Delivery Letter dated 23rd February 1978, addressed to the plaintiff as a Collateral Security. In consideration of the plaintiff further granting to defendant no. 1, another Cash Credit Facility know as "cash Credit (Bills) Facility" for Rs. 35. 000. 00 the following documents were executed;
(A) On 16th March 1978 defendant no. 1 executed in favour of the plaintiff an Agreement for Overdraft to the extent of Rs. 35,000. 00ag
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