( 1 ) PLAINTIFF bank filed a suit under Order 37 of the Code of Civil Procedure for recovery of Rs. 3,95,912. 70 comprising the principal and interest accrued and other charges as on 8-7-1984 against the defendants with costs and pending and future interest. It is alleged that defendant No. 1 is a partnership firm with defendants 2 and 3 as its partners. Defendants requested the bank and opened cash credit hypothecation limit with the branch office of the plaintiff bank in H Block, C. Circus, New Delhi in February, 1979 to the extent of Rs. 1 lac. Security by way of hypothecation of books debts was offered which was accepted by the plaintiff bank. The aforesaid facility was availed of by the defendants during the course of operation of the account. The disbursements and/or transfer made from the account were also confirmed in writing Defendants 1, 2 and 3 also requested the bank to grant them temporary bill discontinuing/cheque purchase facility which was also allowed by the bank from time to time. At the request of the defendants, the plaintiff bank discounted two cheques dated March 28 and 31 of 19 ROintbename of defendant No I drawn on the Punjab and Sind Bank, Kalba Devi Road, Bombay for Rs. 55. 000. 00 and Rs. 45. 000. 00 respectively. Proceeds of these cheques were credited to cash credit account of defendant No. I, from where these amounts were withdrawn by the defendants during the operation of the cash credit account. Both the cheques were drawn on Nandand Co. favouring defendant No. 1. Defendants assured the bank that the cheques when presented would be honoured and in the event of their remaining unrealised, defendants would without any demur and contest pay to the bank the amount of the cheques with interest and other charges. The cheques were dishonoured and the defendants were accordingly informed.

( 2 ) ON 19-11-1982, a sum of Rs. 1,50,51880 and Rs. l lac respeclively were due and payable by the defendants in their cash credit account inclusive of interest and as the principal sum in the bill discounting purchase account. In consideration of the aforesaid subsisting advances and their liability which was also acknowledged, defendants 2 and 3 for and on behalf of defendant No. I executed and delivered various documents including the demand promissory note with interest at the rate of 9. 5% per annum over and above the RBI rate subject to minimum of 19. 5% per annum with quarterly rests, form No. 106 waiving the right of presentment of pronote and other negotiable instruments, form No. 126 ie, letter of continuity; form No. 159 confirming that the promissory note shall continue to be a security with the bank for repayment of the ultimate balance sum remaining unpaid ; form No 291 agreeing to pay additional interest at the rate of 2. 5% per annum in case of default or irregularity in repaying the due amount ; deed of hypothecation hypothecating the entire book debt present and future; form No. 216 a certificate of their being non-agriculturists and foregoing of rights etc. . available to an agriculturist under any Central or Provincial Act, and a letter of hypothecation for inland bills purchase. All these documents were executed on 19-11-1982. It is then alleged that bank is entitled to recover interest at the rate at which bank usually grant similar loan facilities to its customers. A sum of Rs. 1,31,204. 70 is alleged to be due by way of interest on the amount of the unrealised cheques. Thus, a sum of Rs. 2,31,204. 70 is alleged to be due from the defendants jointly and severally including interest upto 8-7-1984. The plaintiff bank also claimed pending and future interest at the rate of 18% plus 2 5% per annum.

( 3 ) DEFENDANTS 2 and 3 as partners of defendant No. 1 also operated the cash credit account and all cheques whenever issued were duly encashed by the bank in the regular course of its banking business and amounts thereof were duly debited to the aforesaid account maintained in the name o