ORAL JUDGMENT

Defendants in O.S.No.6567/2000 are the appellants, challenging the judgment and decree passed in the said suit for recovery of the loan amount granted by the respondent/plaintiff.

2. Parties are referred to as plaintiff and defendants as per their original ranking before the trial Court.

3. Operative portion of judgment and decree of the trial Court reads as under:“The suit of the plaintiff is hereby decreed against the defendants 1 and 2 with costs. The defendants 1 and 2 are hereby directed pay a sum of Rs.5,98,974/- to the plaintiff bank together with interest @ 12% p.a from the date of filing of the suit till today on the principal amount and 6% p.a on the decretal amount from today till the date of realisation.The defendants 1 and 2 are given time of six months to pay the decretal amount. In case of failure on the part of the defendant Nos.1 and 2 to pay the suit claim to the plaintiff bank, the plaintiff bank shall be at liberty to bring the schedule property for sale to realise the suit claim. In case the proceeds of the sale were to fall less to the suit claim, the plaintiff bank shall be at liberty to proceed personally against the defendants 1 and 2.

Draw decree accordingly.”

4. Facts in the nutshell which are utmost necessary for disposal of the present appeal are as under:

4.1. First defendant being the sole proprietor of Chamundi Global Company and second defendant being the co- obligant, availed the loan facility under the inland letter of credit facility scheme to the extent of Rs.50,00,000/- from the plaintiff bank by executing necessary agreements in this regard. The rate of interest that was agreed upon having regard to the commercial activities was at the rate of 20.40%per annum.

5. Apart from that, defendants also executed on-demand promissory note in a sum of Rs.50,00,000/- on 28.01.1999.

6. Defendants agreed to pay the loan amount jointly and severally. Defendant No.2 secured the liability of the loan by executing a mortgage by deposit of title deeds in respect of the immovable properties owned by defendant No.2 mentioned in the schedule (hereinafter referred to as ‘mortgage property’) `to the plaint, which reads as under:

“SCHEDULE-A

Description of mortgaged immovable property

All the piece and parcel of the property bearing house Sy.No.71.2, situated at Mahadevapura village, Krishnarajapuram Hobli, Bangalore South Taluk and having area of 25 Guntas and bounced on the East by : Munichikkappa a land West by : Cart Road North by : Narayanappa’s Property South by : Village”

7. Defendant No.2 by letter dated 28.01.1999, confirmed the deposit of title deeds of schedule ‘A’ property.

8. Admittedly, the defendants became defaulters.Apart from the above facility, plaintiffs opened a Letter of Credit (hereinafter referred to as ‘LC’) in a sum of Rs.10,28,000/- in favour of B.R.Jewellers. Said facility was numbered as L.C.No.24/1999. The drawee of the L.C. namely; B.R. Jewellers on the same date discounted the L.C. and received the entire payment which was duly accepted by defendant No.1.

9. Thus, there was a liability to the extent of Rs.10,28,000/- on the defendants and due date was 30.04.1999.

10. Admittedly, defendants did not clear the liability of Rs.10,28,000/-. Instead, they postponed the payment. Therefore, the plaintiff wrote a letter to the defendants and fixed deposit in a sum of Rs.6,00,000/- which was in the name of defendant No.1, was adjusted towards the liability of Rs.10,28,000/- as per the instructions of defendant No.1, acknowledging the liability of Rs.10,28,000/-.

11. Thus, there was balance liability in respect of the L.C.No.24/1999.

12. Defendant Nos.1 and 2 did not come forward to clear the liability, despite repeated reminders dated 21.07.1999, 28.08.1999, 08.12.1999 and on 16.03.2000. Ultimately, plaintiff issued a legal notice on 20.05.2000.Defendants did not comply the callings of the notice nor reply.

13. As on the date of issue of legal notice, liability is in the account of the defendan