The court emphasized the importance of fulfilling obligations under the NABARD scheme and held that failure to approach the bank for prompt action absolved the bank from liability.

This second appeal is directed against the Judgment and Decree dated 30.12.2005 passed in A.S.No.32 of 2005, decreeing the suit for recovery of Rs.97,707/-with interest and thereby reversing the judgment of District Munsif Court, Madurantakkam in O.S.No.133 of 2004.

2. Thecase of plaintiff is that on 22.02.1996, first defendant borrowed a sum of Rs.40,000/-from the plaintiffs Bank for digging a new Well under NABARD scheme and executed Promissory Note and Hypothecation Agreement for prompt re-payment. Second defendant, is the husband of first defendant, who had executed a guarantee letter on the same date. First defendant deposited the title deeds on 23.02.1996 for the purpose of creating an equitable mortgage. It was confirmed by their letter dated 24.02.1996. Further case of the plaintiff Bank is that defendants have also confirmed balance outstanding on 19.02.1999 and 16.02.2002. The plaintiff Bank has filed the suit O.S.No.133 of 2004 claiming Rs.97,707/- along with interest.

.3. The defendants resisted the suit contending that they have obtained loan from the bank, which has been refinanced by NABARD Bank and under the scheme defendants ought to have obtained a certificate from the Geological Department regarding the prospects of the Well. Further case of defendants is that after digging the Well, there is failure of the Well. The Bank verified the same and furnished the particulars of failure of the well to its Certifying Agency, which is constituted for the specific purpose. According to the defendants, once the bankers received the letter about the failure of the well, no interest should be charged on the said loan. Since there was delay on the part of plaintiff Bank in getting compensation under NABARD Scheme, the plaintiff cannot recover any amount from the defendants. The defendants have alleged that due to deficiency in service rendered by the plaintiff bank, the first defendant has incurred loss of Rs.2,00,000/-, which the plaintiff Bank is bound to compensate.

4. On the above pleadings, the trial Court framed four issues. To substantiate its claim, plaintiff Bank examined PW1 and marked Exs.A1 to A35. Defendants 1 and 2 were examined as DW1 and DW2 and Ex.B1 was marked on the side of the defendant. Upon consideration of evidence, trial Court held that plaintiff Bank have not taken steps to inspect the Well and to furnish particulars to Certifying Authority. The trial Court further held that the plaintiff Bank ought to have send the report to the District Registrar Co-operative Societies claiming compensation under NABARD Scheme. It was further held that without placing the result of the report before the Court, plaintiff Bank would not be entitled to claim the amount and on this findings, trial Court dismissed plaintiffs suit.

5. Beingaggrieved by the judgment of the trial Court, plaintiff Bank filed appeal in A.S.No.32 of 2005. Referring to Exs.A33 to A35, lower Appellate Court held that the Bank had taken steps to get the compensation amount in time. Lower appellate Court further held that under Ex.A2 defendants have undertaken to repay the amount and that it cannot resile from it. Lower Appellate Court further held that second defendant himself is an employee of the plaintiff Bank and have borrowed the amount and that the defendants are liable to pay the amount. On those findings, lower Appellate Court reversed the judgment of the trial Court and decreed the suit passing preliminary decree. Challenging the judgment of the lower Appellate Court, appellants /defendants have filed this second appeal.

.6. The second appeal was admitted on the following substantial question of law:

."Whether the Lower Appellate Court is right in holding that Ex.B1 is a contract between the appellants and respondent without noticing that the said scheme was formulated by NABARD and accepted by the respondents for the grant of loan to agriculturist?

7. Thelearned counsel for the appellant contended that the lower