IMPORTANT POINT
The court established that financial institutions must adhere to the explicit terms of loan agreements and cannot impose additional charges not agreed upon by the parties.

JUDGMENT :

ARUN MONGA, J.

1. The appellant herein seeks quashing of the judgment and decree dated 01.11.1993, passed by the learned Additional District Judge, No. 2, Jodhpur, vide the plaintiff's (appellant bank herein) claim for an amount of Rs.3,30,831.60/- was dismissed.

2. The relevant facts of the case are that the respondent-defendant No. 1, a Transport Operator, submitted an application on 30.12.1980 for a financial facility to purchase a new Ford D-1210 Truck Chassis under the agreed terms and conditions. The appellant-plaintiff Bank granted the financial facility to the tune of Rs.1,88,000/- on 05.01.1981, and the respondent-defendant No. 1 executed a Demand Promissory Note and an agreement for the hypothecation of the vehicle in favor of the appellant-plaintiff Bank. The respondents-defendants Nos.2 and 3 stood as guarantors and executed letters of continuing guarantee in favor of the appellant-plaintiff Bank.

2.1. After the loan facility was advanced by the appellant-plaintiff Bank, the respondent-defendant No. 1 purchased the truck chassis from M/s. National Motors, Jaipur. The respondent-defendant No. 1 paid Rs.67,394/- to the appellant-plaintiff Bank on various dates. However, as of 02.09.1986, an amount of Rs.3,30,831.65/- was outstanding towards the respondent-defendant No. 1, which he failed to pay. Consequently, a civil suit for recovery of the outstanding amount was filed against the respondents-defendants in the Court of the learned District Judge, Jodhpur, from where the suit was transferred to the Court of the learned Additional District Judge No. 2, Jodhpur for decision.

3. In his written statement, the respondent-defendant No. 1 pleaded that the plaintiff-bank had indeed issued a bank draft for the truck's price and had taken his signatures on several blank forms. The plaintiff-bank also took Rs.4,000/- for expenses and Rs.25,000/- as a fixed deposit from him. He also claimed that due to the malfunctioning of the Ford Truck's machinery, he suffered a huge loss. He bought the truck on the assurance of the plaintiff-bank that the loan would be charged interest only after the truck was in good condition and that the interest rate was only 9% per annum. He did not agree to pay interest at the rate of 11.85% or 12.5% with quarterly rest. He also claimed not to have executed any demand promissory note, agreement, hypothecation, or bail bond. The respondent-defendant No. 1 expressed his readiness to hand over the truck to the plaintiff-Bank. He also claimed that the plaintiff-Bank did not adjust the amount of Rs.25,000/- deposited by him.

3.1. The respondents-defendants Nos.2 and 3 denied being guarantors of the respondent-defendant No. 1 or having executed any surety bond. They also stated that despite the outstanding amount against the respondent-defendant No. 1, the Bank did not take any steps to recover the amount nor take possession of the truck, thus, no liability can be fastened upon them.

3.2. In light of the above, the learned trial court framed the following issues:

1. Whether the plaintiff-Bank had Shree Krishna Murari Mathur as Branch Manager and Chief Officer who had been empowered to file, sign, and take all actions in this regard on behalf of the plaintiff-Bank?

2. Whether the plaintiff admitted to taking a loan from the Bank subject to the conditions mentioned in para No. 6 of the plaint?

3. Whether defendant Sohan Singh executed a Pronote and Agreement dated 05.01.1981 in favor of the plaintiff-Bank in respect of the hypothecation of Truck Ford and provided a loan facility of Rs.1,88,000/-?

4. Whether defendants Om Prakash and Loon Singh stood surety for the amount borrowed by defendant Sohan Singh from the plaintiff Bank and executed surety bonds in favor of the plaintiff-Bank?

5. Whether defendant Sohan Singh had agreed to pay interest on the loan amount at 11.85% per annum with quarterly rest and also decided to pay interest at the increased interest rate whenever the interest rate increased and on 12.