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High Court Of Himachal Pradesh
D.P.SOOD
UCO.BANK - Appellant
Versus
ASHOK GAUTAM - Respondent
Civil Suit No. 41 of 1987
Decided On : 12/13/1991
LOAN TRANSACTION - GUARANTEE - LIMITATION - INTEREST - RECOVERY OF INSURANCE PREMIUM AND GUARANTEE FEE - INTERPRETATION OF LOAN DOCUMENTS - BANKING LAW - U. CO. BANK V. ASHOK GAUTAM AND ANOTHER
Fact of the Case:
The plaintiff bank sanctioned a loan to the principal borrower, Ashok Gautam, for the purchase of a truck. The loan was guaranteed by the defendant, Tilak Raj Sharma. The principal borrower defaulted on the very first installment, and the bank filed a suit for the recovery of the loan amount, interest, and other charges.
Finding of the Court:
The court found that the defendant had stood as a guarantor for the loan in question and that the suit was within limitation. The court also held that the plaintiff was entitled to recover insurance premium and guarantee fee from the defendants. The court further held that the rate of interest payable by the defendants was 9-1/2% per annum.
Issues: 1. Whether the suit has been instituted by persons competent to do so? 2. Whether the loan transaction was duly guaranteed by defendant No. 2? 3. In case above issue is proved in the affirmative, whether defendant No 2 revoked the said guarantee? If so when and with what effect? 4. Whether the suit Is within limitation? 5. Whether the signatures of defendants were obtained on blank forms? If so, with what effect? 6. Whether the plaintiff is entitled to recover insurance premium and guarantee fee from the defendants? 7. To what rate of interest is the plaintiff bank entitled to recover? 8. Whether the plaintiff is entitled to recover 4,61,310.55 p. or any other amount from the defendants?
Ratio Decidendi: 1. The court held that the suit was instituted by persons competent to do so, as the branch manager of the plaintiff bank was authorized to file the suit. 2. The court held that the defendant had stood as a guarantor for the loan in question, as evidenced by the loan documents and the defendant's subsequent conduct. 3. The court held that the defendant had not revoked the guarantee, as the letter sent by the defendant to the bank informing them that he had not stood as a guarantor was not sent until after the bank had filed the suit. 4. The court held that the suit was within limitation, as the principal borrower had acknowledged the debt in writing within the limitation period. 5. The court held that the signatures of the defendants were not obtained on blank forms, as the loan documents were filled in before they were signed. 6. The court held that the plaintiff was entitled to recover insurance premium and guarantee fee from the defendants, as the loan documents provided for such recovery. 7. The court held that the rate of interest payable by the defendants was 9-1/2% per annum, as this was the lowest rate of interest specified in the loan documents.
Final Decision: The court passed a decree in favor of the plaintiff and against the defendants for the recovery of Rs. 2,84,566.57, with costs proportionately jointly and severally. The plaintiff was also held entitled to the recovery of future interest at the rate of 9-1/2% from the date of the filing of the suit till the date of its realization.
D. P. Sood, J.—Shri Ashok Gautam, the Principal borrower intended to purchase a truck. For that purpose, he made an application Ex. P-l dated 12-2-1982 clarifying that he himself is principal borrower that the loan of Rs. 1,80,700 would be guaranted by defendant No 2 Shri Tilak Raj Sharma. Accordingly, the loan, referred to above, was paid to the loanee, that is, defendant No. 1 on 12-2-1982 The U. Co. Bank a Body Corporate Constituted under the Banking Companies (Acquisition and transfer of undertakings), Act, 1970 (plaintiff) sanctioned the loan pursuant to which the principal borrower as also his principal guarantor executed the various loan, like, Memo of agreement-cum-guarantee deed (Ex- P-2), term loan agreement (Ex P-3) and hypothecation agreement (Ex. P-4). Pursuant to the aforesaid arrangement made in between the parties, the principal borrower Ashok Gautam (Defendant No. 1) was to deposit an amount of Rs. 32,206 from his own pocket in addition to the loan so advanced by the plaintiff for the purchase of the truck. There is no dispute in between the parties regarding the purchase of the truck bearing No.HPK-1885.
2. According to the terms and conditions of the agreement, interest agreed to be payable by defendant No 1 was at the rate of 6% over the bank rate subject to a minimum of 15% with quarterly rests. The entire loan, including interest was repayable in 48 instalments, each instalment being of Rs. 4,500. The first instalment was to be paid on 12-3-1982.
3. The plaintiffs case is that the principal borrower (defendant No. 1), became defaulter on the very first instalment, that is, on 12-3-1982; that they thereafter made attempts to regularise the payments but failed to do so. However, defendant No. 1, Ashok Gaaiam had been seeking time to re-pay the entire amount by writing various letters which are Exts. P-14 to P-19. It is alleged (hat in between defendant No. 1 also admitted the liability by signing the balance confirmation letters and acknowledging the debt of the plaintiff-bank However, as per further assertions made, no sum towards the liquidation of the loan amount was repaid by defendant No. 1. It is alleged that as per the terms of the agreement (Ex. P-2) Tilak Raj, Guarantor was also bound to repay the said amount, his guarantee being a continuing and co-extensive with that of the principal borrower. Having failed to realise the loan amount, ultimately plaintiffs filed the instant suit on 2nd June, 19 7 for the recovery of an amount of Rs. 4,61,310.53, inclusive of interest as on 31-5-1987.
4. Defendant No 1 raised a preliminary objection that cause of action to the plaintiff had accrued on I2-3-i982 when be became a defaulter and the plaintiff having not taken legal steps to recover the amount by the sale of the hypothecated truck and allowing the same to increase, is not now entitled to recover the same from him. On merits he took the plea that suit has not been filed through a competent person to do so; that agreed rate of interest was 92% and not the interest which has been charged in the suit; that his signatures had been obtained on blank loan papers; that plaintiff is not entitled to the recovery of the sum towards the Insurance Premium or the guarantee under the C. I. C. G. C. scheme. He also contended that the suit is time barred.
5. Defendant No. 2, on the other hand contended that he never stood guarantee nor executed any such document in favour of the plaintiff. According to him, he had signed the document as a witness. He further maintained that memorandum of agreement was not a guarantee deed and even if it be deemed to be so, defendant No. 1 had no authority to bind him by acknowledging the debts of the plaintiff. His further contention is that the suit is time barred. Apart from it, he contended that the suit is bad for misjoinder of parties and in case of a decree being passed against them, its recovery should be made In the first instance by the sale of the hypothecated truck. Acco
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