The court established the validity of cash credit facilities, the legality of interest charges, and the right of the bank to adjust FDRs towards the loan account.

Challenge in this second appeal is made to the judgment and decree dated 18.12.2002, passed in A.S.No.154 of 1999, on the file of the First Additional District Judge cum Chief Judicial Magistrate, Coimbatore setting aside the judgment and decree dated 16.10.1996, passed in O.S. No.849 of 1990, on the file of the II Additional Subordinate Court, Coimbatore.

2. Parties are referred to as per their rankings in the trial Court.

3. Suit for recovery of money.

4. The case of the plaintiff, in brief, is that at the request of the defendants, the plaintiff granted to the first defendant, the wife of the second defendant, a cash credit advance of Rs.50,000/- in the year 1978, for the working capital requirements of her sole proprietory concern Karthik Pharmacy on the personal guarantee of the second defendant and subsequently in 1980, the plaintiff granted another cash credit advance of Rs.50,000/- for the working capital requirements of her another sole proprietory concern Karthik Enterprises, also on the personal guarantee of the second defendant and the above-said advances were being availed of by the first defendant by operating an account with the plaintiff and the credit facilities were reviewed and renewed and enhanced/reduced subsequently in May 1980 and October 1981 and again on 10.08.1994, the first defendant executed two demand promissory notes in favour of the plaintiff, one for Rs.90,000/- in respect of the cash credit advance granted to Karthik Pharmacy and the other for Rs.75,000/- in respect of the advance granted to Karthik enterprises, agreed to pay the interest as recited therein and also on the same date, executed two agreement of hypothecation and two agreements of continuing security, while the second defendant, as guarantor, executed two separate agreements of guarantee in respect of the abovesaid two advances and the first defendant has been enjoying the credit facilities and however, failed to adhere to the terms of the grant of the advance and the activity in her two trade units was very little and eventually she closed the business and disposed of the hypotheca without the plaintiff's prior consent and without settling the plaintiff's dues and the plaintiff called upon the defendant to liquidate the dues in the two accounts and also issued a lawyer's notice demanding the amounts, but the amounts due in the first defendant's account remained unpaid and the plaintiff is in possession of the two term deposits in the name of the second defendant and the second defendant had agreed not to withdraw the said two deposits, one for Rs.39,700/- and another for Rs.1,05,900/- and undertook to adjust the maturity value thereof under the abovesaid two accounts and in exercise of the plaintiff's lien as a banker over the abovesaid two term deposits, which matured on 27.7.89, the plaintiff after giving due notice, adjusted the maturity value thereof against the two accounts of the first defendant, for which, the second defendant is jointly and severally liable with the first defendant as guarantor and the defendants were making repeated pleas for waiver of the entire overdue interest which the plaintiff was not willing to concede, though the plaintiff is willing to offer concession in interest, for which the defendants are not agreeable and interest had been charged in the two accounts as per law and agreed to and the defendants had also executed the letters of acknowledgement of liability on 15.07.1987 and hence, the suit for recovery of money.

5. The case of the defendants, in brief, is that the suit laid by the plaintiff is not maintainable either in law or on facts. The first defendant availed credit facilities for the business carried on in the name of M/s. Karthik Enterprises and M/s. Karthik Pharmacy at Coimbatore and in 1979 and 1980, as averred in the plaint, a cash credit advance of Rs.50,000/- each have been availed for the above said business and the agreed interest was only 17% and the defendants had never