JUDGMENT:

The appeal suit is filed against the decree and judgment dated 14-03-2005 in O.S.No. 69 of 2005 passed by learned II Additional Senior Civil Judge, Nellore (for short, 'the trial Court'). The suit was filed by the plaintiffs for recovery of Rs.5,04,000/- from the defendants with subsequent interest @ 18% p.a. from the date of suit till the date of realization with costs.

2. The case of the plaintiffs as narrated in the plaint, in brief, is as follows:

The plaintiff is a registered firm, carrying on business in manufacturing polythene bags, situated in Autonagar at Nellore. The plaintiff made an application with the defendants for sanction of a loan of Rs.7,55,000/- for purchase of five items of machinery from different suppliers. On seeing the application, the defendants have sanctioned only Rs.4,90,000/- being 65% of Rs.7,55,000/- and communicated the same vide letter dated 18-12-1998. The plaintiff took the plaint schedule property on lease for ten years from Messrs S.F.K. Packaging Industry under a registered lease deed dated 15-06-1999 as required by the defendants and as per their norms and furnished the same to defendant No. 2. The plaintiff initially placed an order for purchase of an extruder with Messrs Eswaran Industries, Chennai, and got the same on 12-07-1999 and installed it in the leasehold premises and submitted bill for Rs.5,61,000/- with defendant No. 2 who released on 03-08-1999 an amount of Rs.2,05,000/- out of Rs.3,82,000/- being 65% of Rs.5,89,000/- i.e. being the cost of extruder @ Rs.5,61,000/- + Rs.8,000/- for cost of packing and forwarding + Rs.10,000/- for the cost of preliminary and preparative expenses + Rs.10,000/- for deposits.

Defendant No. 2 inspected the running of the extruder after its installation and agreed to release the balance of Rs.1,77,000/- which includes 25% of the withheld amount of the supplier. All of a sudden, defendant No. 2 not only stopped the above payment but also stopped the plaintiff to place order for other items of the machinery. Therefore, the plaintiff was forced to pay 2.5% of the withheld amount to the supplier and to incur the other expenditure, thereby the plaintiff spent Rs.3,82,000/- towards installation of the extruder. The plaintiff has started running the unit on 01-08-1999 with one extruder. Defendant No. 2 sent a letter on 15-10-1999 to the plaintiff demanding Rs.7,960/- towards interest for the quarter ending October, 1999, as against the terms of sanction letter because the repayment of loan shall commence one year from the date of disbursement. The plaintiff, being unable to pay the same on 10-11-1999 as the unit just commenced the production, requested for some time. However, the defendants on 16-11-1999 abruptly and illegally seized the machinery extruder alleging that the plaintiff shifted the machinery but, in fact, it was not shifted. Due to seizure of the unit, the plaintiff suffered lot of mental agony and unable to discharge the debts contracted for the purchase of the machinery. The plaintiff sent a letter on 20-11-1999 to the defendants explaining the facts and difficulties but no reply was given by the defendants for the same. The defendants have also seized raw- material worth of Rs.70,000/- and due to their illegal seizure, the plaintiff sustained a loss of Rs.50,000/-. The defendants are liable to pay the amounts including cost of the extruder minus the amount advanced by them and therefore the plaintiff was constrained to file the suit.

3. Brief averments in the written statement filed by defendant No. 2 are as follows:

Defendant No. 2 released Rs.2,10,600/- but not Rs.2,05,000/- only as contended by the plaintiffs and it consists of Rs.1,71,200/- to the supplier of extruder, Rs.2,500/- was adjusted towards upfront fee, Rs.2,457/- towards insurance premium and Rs.34,488/- was paid to the plaintiffs directly. A sum of Rs.1,40,00/- was retained towards satisfactory performance of the machinery. The defendants agreed to release Rs.1,40,400