Judgment:

The appeal is filed against the judgment and decree dated 13-02-2001 in O.S.No.417 of 1981 passed by the learned Principal Senior Civil Judge, Guntur, Guntur District. The suit is filed for recovery of Rs.2,48,050/- being the amount due under the FDR dated 24-9-1977 and for subsequent interest from the 1st defendant; or alternatively for recovery of arrears of rent along with interest a sum of Rs.2,42,339-76 ps from the other defendants 2 to 4; and for costs.

2. The case of the plaintiff/State as narrated in the plaint, in brief, is as follows:

(i) It is pleaded that the defendants 2 and 3 in the name of M/s. P.

Ranadhir Reddy and Chalapati Seetharamayya, represented by its partner the 2nd defendant became the lessees of Guntur Group of Arrack shops, for the excise year 1977-78 commencing from 01-10-1977 to 30-9-1978. Similarly, in the auction held by the plaintiff in September, 1977, the arrack shops of Jaggaiahpet, Mutyala, Takkellapadu, Vedadri, Penuganchiprolu, Gannavaram, Mustabad, Thotlavallur, Mullapadu, Arigellapadu and Malakpet were purchased by the 3rd defendant and he became the lessee. As per the Rules under the A.P. Excise Act and the terms agreed to between the parties at the time of auction, the successful bidder has to furnish security for the rents payable for June, July and August, 1978 either in the form of FDR or in the form of bank security. The lessees have to furnish security for lifting the Minimum Guaranteed Quantity (MGQ) of arrack in the form of Call Deposit Receipts (CDRs) taken in the name of Excise Superintendent.

(ii) It is further pleaded that the 1st defendant/Bank also agreed to give loan for purchasing CDRs to be issued by the bank and payable to the plaintiff with interest up to 30-9-1978. In addition to the CDRs given by the 1st defendant/Bank in the name of the plaintiff, the defendants 2 and 3 deposited earnest money. Accordingly, the 1st defendant/Bank issued FDR dated 24-9-1977 for Rs.2,48,050/- to the firm consists of the defendants 2 and 3, from 01-02-1978 to 30-9-1978, the firm consists of the defendants 2 and 3 carried on business. These are undisputed facts.

(iii) It is further pleaded that the lessees became liable to pay a sum of Rs.2,42,339-76 ps towards arrears of rent and interest as per rules. The defendants 2 and 3 furnished fixed deposits in the name of the plaintiff for Rs.2,48,050/-. The defendants 2 and 3 partners and the 4th defendant later joined as partner, voluntarily admitted his liability. In spite of the repeated demands, the defendants 2 to 4 did not choose to repay the amount due to the plaintiff, the sum of Rs.2,42,339-76 ps with subsequent interest. The plaintiff has got right and power to realize and recover the amount from the defendants 2 to 4 either by appropriating the deposits standing in its name or by proceeding under the provisions of Revenue Recovery Act. The amount of Rs.2,48,050/- deposited in the name of the plaintiff under FDR dated 24-9-1977 repayable after 371 days, the plaintiff sent letter along with FDR for encashment, but the same was returned by the 1st defendant with a letter stating that MGQ was appropriated towards the amount due to it towards the loans and refused to encash the FDR. The 4th defendant has issued notice finding fault with the plaintiff for not encashing the FDR. Therefore, the plaintiff was constrained to file the suit for recovery of the amount due under the FDR from the 1st defendant, or alternatively, for recovery of arrears of rent along with interest from the defendants 2 to 4, a sum of Rs.2,42,339-76 ps.

3. Brief averments in the written statement filed by the 1st defendant are as follows:

It is contended that the bank guarantee furnished by the lessees has to be invoked by the Excise Department on failure of particular parties to pay the rentals. MGQ deposits are meant for all encashment of the FDRs, if the lessee failed to lift the contracted quota of arrack to the extent of failure. Thus, the Excise Rules prov