JUDGMENT

(Prayer: Civil Suit is filed under Order VII Rule 1 CPC and Order 34 Rule 1 of C.P.C. Read with Order 37 Rule (1) of O.S.Rules praying to pass: (a) A Preliminary decree in favour of the plaintiff as against the defendants 1 to 4, (b) Directing the defendants 1 to 4 to pay jointly and severally along with the cost of the suit to the plaintiff a sum of Rs.1,51,64,353/- being the aggregate amount due with future service charge at 4% per annum and Penal Interest at 18% per annum commencing from the date of plaint till the date of final satisfaction of loan amount, (c)If the defendants 1 to 4 failed to pay the decree amount claimed in clause (b) supra direct the schedule A Land and Building and Schedule B plant and machinery to be sold in public auction and appropriate the sale proceeds for the decree amount after defraying the expenses of sale if the sale proceeds is insufficient to recover the decretal amount, (d) pass a personal decree against the defendants two, three and four and (e) to pay the cost of the suit.)

1. The suit was filed to enforce payment of money secured by a mortgage. The plaintiff claimed a sum of Rs.1,51,64,353/- from defendants 1-4 with future service charges at 4% p.a. and penal interest at 18% p.a. from the date of plaint till the date of final satisfaction of the loan amount. In the event of default, the plaintiff sought to enforce the mortgage by bringing the property described in the schedule to the plaint for sale and for appropriation of the decretal amount from the sale proceeds after defraying the expenses of sale.

2. In the plaint, the plaintiff stated as follows:

(a) The plaintiff is a board formed by the Ministry of Agriculture, Government of India for the purpose of promoting, developing and supporting agriculture by providing financial assistance to institutions and individuals engaged in horticulture or the processing of agricultural products. The first defendant applied to the plaintiff on 28.06.1995 for financial assistance by way of term loan for setting up an export oriented unit (EOU) for the cultivation of cut flowers. By relying upon the representation of defendants 2 to 4, the plaintiff sanctioned a term loan not exceeding Rs.1 crore on concessional service charges of 4% p.a. through its letter of intent dated 29.03.1996. In connection therewith, defendants 1-4 executed a demand promissory note dated 05.07.1996; a loan agreement dated 05.07.1996; a deed of hypothecation dated 05.07.1996; a deed of continuing guarantee dated 05.07.1996; an undertaking for creation of permanent security dated 05.07.1996; an undertaking by defendants 2 to 4 not to transfer their shareholding; an undertaking by defendants 2 to 4 to mobilize additional funds, if required, and not to pay off any unsecured debts before the satisfaction of the plaintiff's loan and not to dispose of, pledge, alienate or create any charge over its shareholding; pari-pasu agreement dated 31.09.1997; and memorandum of entry evidencing joint equitable mortgage in favour of the plaintiff and the fifth defendant by the first defendant.

(b) The first defendant registered the charge in favour of the plaintiff with the Registrar of Companies under Section 125 and other applicable Sections of the Companies Act 1956 by filing Forms 8 and 13. Pursuant to the execution of the above documents, the plaintiff disbursed a sum of Rs.50 lacs on 03.07.1997, Rs.35 lacs on 12.03.1998 and Rs.8.50 lacs on 10.02.1999. As per the loan agreement, the repayment schedule was fixed at Rs.20 lacs per year payable on or before 31st March of each year. The said amounts were required to be paid along with service charges at 4% p.a. The fifth defendant was a prior lender and mortgagee in respect of the suit schedule property, and was in possession of the original title deeds of the suit schedule property. Therefore, the original title deeds could not be deposited with the plaintiff. The first defendant executed revival letters dated 26.09.1998 and 2