The main legal point established in the judgment is the liability of the guarantors for the loan amount as per the terms of the guarantee deed, and the determination of the entitled amount and interest rate by the court.

JUDGMENT :

(Prayer: Appeal Suit has been filed under Order 41, Rule 1 of the Civil Procedure Code r/w under Section 96 of the Civil Procedure Code praying to set aside the decree and judgment passed in O.S.No.1108 of 2005 dated 24.09.2007 by the VI Additional Judge, City Civil Court, Chennai.)

1. Appeal against the money decree passed against the appellants, who stood guarantee for the packing credit facility extended by the first respondent bank to the second respondent.

2. The plaint averment in short:

The plaintiff is a Nationalised Bank. The 1st defendant is the Proprietor of M/s Sithi Vinayagar Exports. During the month of May 2002, to process and execute the orders received for export of onions, the first defendant requested the plaintiff bank to extend the existing packing credit facility to the tune of Rs.5lakhs. Accordingly, the plaintiff-bank sanctioned two export packing credit facilities (P.C.No.22 and P.C.No.24) on 9/05/2002. Defendants 2 to 4 stood personal guarantee for the said loan facilities. Defendants 2 and 3 also jointly pledged their MIP 97 (II) Unit Certificate No.300971760032041 representing 50,600 units. The first defendant executed a pronote dated 09/05/2002 for Rs.5,00,000/- and undertook to repay the amount with 8% p.a., interest with quarterly rests. The first defendant has also created hypothecation of stocks of onions and paking materials. Defendants 2 to 4 who stood guarantee for the loan, executed a deed of guarantee dated 09/05/2002 for a sum of Rs.5,00,000/-. On intimation to the 5th defendant about the pledge of the units by defendants 2 and 3, the 5th defendant marked lien dated 08/07/2002 against the plaintiff bank in respect of Folio No.300030220000024.

3. While so, when the plaintiff, vide letter dated 28/07/2004, sought the 5th defendant to furnish the value of the lien marked units, to their shock and surprise it was informed that the said units were already repurchased by the 2nd defendant and settled in his favour. The 6th defendant through his letter dated 30/07/2004 admitted that due to inadvertence the lien marked in the system was not carried out, hence, they allowed the 2nd and 3rd defendants to repurchase the units. The 6th defendant knowingly allowed the 2nd and 3rd defendants to repurchase the lien marked units and paid them a sum of Rs.11,49,590/- through cheque dated 01/04/2004.

4. Notice issued to the 1st defendant the principle borrower and defendants 2 to 4 the guarantors to repay the loan amount and also to the 5th and 6th defendants informing them that due to their carelessness and neglect, the plaintiff is made to suffer and unable to recover the loan due. Because of the lien marked on the units of the guarantors, packing facility loan was granted to the 1st defendant, without any primary security. Since they allowed defendants 2 and 3 to repurchase the lien marked units, they are liable along with the other defendants to repay the loan amount with agreed interest. Hence, the suit filed for recovery of Rs.5,52,276/- together with interest at the rate of 15.5.% p.a., with quarterly rests as on 10/08/2004 payable by defendants 1 to 6 jointly and severally.

5. The reliefs sought in the suit are as under:-

(a) To direct all the defendants to pay a sum of Rs.7,55,065/- (Rupees seven lakhs and sixty five only) with future interest at the rate of 15.5% per annum with quarterly rest towards packing credit facility from the date of plaint till the date of realisation in full with cost within the stipulated time fixed by this Hon’ble Court.

(b) If they fails to make the payment as aforesaid to order of sale of Hypothecated stocks lying at No.12, Kamarajar Salai, Virukambakkam, Chennai 600 092 which is more fully described in the schedule given hereunder and for appropriation of sale proceeds towards the amount due and decreed against the two facilities.

(c) For a direction that in case of the sale proceeds of the schedule mentioned moveable properties are found to be insufficient for th