(Prayer: Original Side Appeal filed under Order XXXVI Rule 1 of the O.S.Rules read with Clause 15 of the Letters Patent against the order dated 5.3.2007 in Application No.3294 of 2006 in C.S.No.265 of 2006.)

R. BANUMATHI, J

1. Being aggrieved by the order dated 5.3.2007 allowing Application No.3294 of 2006 filed Under Order 7 Rule 11(d) C.P.C. read with Order 14 Rule 8 of Original Side Rules and thereby rejecting the suit - C.S.No.265 of 2006, Appellant/ Plaintiff has preferred this appeal.

2. The background facts of the appeal and suit - C.S.No.265 of 2006 are as follows:-

The plaintiff is the owner of the plaint schedule property - Plot No.12/C-1 (SP), Industrial Estate, Guindy, Chennai - 600 032 measuring 7711 sq.ft. having purchased the same on 11.3.1994. Defendants 2 and 3, who were then running a partnership business under the name and style of M/s.Balaji Fashions, became the tenants under the plaintiff on monthly rental basis for their business activities. Defendants 2 and 3 requested the Plaintiff to put up additional floor space in the second floor for their business and promised that they would arrange for a bank loan from their bankers for putting up such additional space. Under Liquirent scheme, the 4th defendant - Indian Overseas Bank, Sowcarpet Branch sanctioned Rs.30 lakhs to the Plaintiff on 18.5.2004. Under the Liquirent scheme, loan is sanctioned against the rents receivable from the secured asset. The term loan of Rs.30 lakhs is repayable in sixty equated monthly instalments commencing from June 2004. For the said loan, the 2nd defendant furnished continuing personal guarantee by executing guarantee deed on 18.5.2004. The plaintiff has also created a mortgage over the plaint schedule property in favour of the Bank by way of deposit of title deeds and the same is evidenced by letter of confirmation dated 19.5.2004. The plaintiff has also executed a power of attorney deed on 18.5.2004 appointing the Bank as its power agent to receive the rent payable by M/s.Balaji Fashions. As per the terms and conditions, Balaji Fashions was remitting the rents directly to the Bank. However, the payment was irregular and the cheques issued by Balaji Fashions towards rents were returned dishonoured on presentation, which was brought to the notice of Plaintiff in April-May, 2005.

3. The 1st defendant was originally a partnership firm under the name and style of M/s.Balaji Fashions. In May, 2003, a cash credit limit of Rs.50 lakhs was sanctioned to the said Balaji Fashions and the same was not availed by the said firm. The business of the said Balaji Fashions was closed and its assets and liabilities were transferred to the 1st defendant - Cavin Cally Fashions (India) Pvt.Ltd. By sanction letter dated 4.6.2004, the Bank had sanctioned cash credit limit of Rs.55 lakhs to the 1st defendant. For the cash credit facility availed by the 1st defendant, the plaintiff stood as guarantor and the plaint schedule property was also under the equitable mortgage to the Bank to secure the outstanding in the Liquirent loan. According to the Bank, the plaintiff and the 1st defendant agreed that the residual value of the plaint schedule property has to be taken as a collateral security for the cash credit limit sanctioned to the 1st defendant. In pursuance of the same, the plaintiff is stated to have authorised the Bank to continue to hold the documents already deposited by the plaintiff on 18.5.2004 as security to the cash credit limit availed by the 1st defendant also. On 17.6.2004, the plaintiff confirmed the said constructive deposit of title deeds in writing. The 1st Defendant operated the cash credit account for its business needs.

4. On 5.1.2006 the Bank received a notice from defendants 2 and 3 from which the Bank came to know that the defendants 2 and 3 have been declared as insolvents in I.P.No.4 of 2006 by the High Court, Chennai. In pursuance to the Insolvency of the promoters, the Bank classified the account as Non-Performing