THE HONOURABLE Dr.JUSTICE G.RADHA RANI

JUDGMENT:

This appeal is filed by the appellant-defendant aggrieved by the judgment and decree dated 23.10.2002 passed in O.S No.163 of 2000 by the XI Additional Chief Judge, City Civil Court (FTC), Hyderabad.

2. The respondent is the plaintiff.

3. For the sake of convenience, the parties are hereinafter referred as arrayed before the trial court.

4. The plaintiff filed the suit for recovery of money of Rs.5,88,000/-

with interest at 24% per annum. The plaintiff was a finance company registered under the Companies Act, 1956, represented by its Managing Director Mr. G. Mahesh. The contention of the plaintiff was that the plaintiff and defendant were longtime friends and had longstanding association. The defendant had also deposited amounts with the plaintiff company. One day, the defendant brought his friend by name Mr. B.Kutumba Rao and introduced him and stated that the said Kutumba Rao was in need of money for his business requirement and requested the plaintiff to advance a loan of Rs.3,00,000/- and offered to stand as a guarantor. Mr. Kutumba Rao submitted loan application on 05.11.1995 and executed a promissory note on the same date for which the defendant signed as a guarantor. After executing the said documents, the plaintiff issued a cheque bearing No.130624 dated 05.11.1995 in favour of Mr. B. Kutumba Rao drawn on Allahabad Bank, Himayathnagar Branch, Hyderabad. The plaintiff came to know that the cheque issued by the plaintiff was encashed at Vijayawada. As per the terms of the loan, the loan was repayable together with interest at 24% per annum within two years from the date of execution of promissory note. Mr. Kutumba Rao did not repay the amount with interest even after lapse of two years by 05.11.1997. The plaintiff informed the defendant that Kutumba Rao defaulted in payment of loan and that the shares of Vysya Bank offered by Kutumba Rao as security for repayment of loan were sent to Vysya Bank to realize the amount and that he came to know that the shares were not genuine but spurious. The plaintiff stated that he gave loan in favour of Kutumba Rao on 05.11.1995 only on the basis of representation made by the defendant that Mr. Kutumba Rao was his friend. The plaintiff got enquiries made at Vijayawada and came to know that Mr. Kutumba Rao was not residing in the address given in the application. The plaintiff made number of attempts to trace Mr. Kutumba Rao, but in vain. Mr. Kutumba Rao either was absconding or was a fictitious person. The plaintiff requested the defendant several times to repay Rs.3,00,000/- along with interest since he was co-guarantor. Instead of repaying the amounts to the plaintiff, the defendant started blackmailing the plaintiff company. The defendant sent false complaints against the plaintiff company to the authorities like Reserve Bank of India, Company Law Board etc., that the plaintiff was withholding the fixed deposits of defendant and his relatives illegally. The plaintiff was having deposits of the defendant worth Rs.3,00,000/- incidentally equivalent to the loan taken by Mr. Kutumba Rao. The defendant kept the said deposit by way of security and the defendant was now using pressure tactics to repay the deposit amount, because of the demand made by the plaintiff to defendant to repay the amount of Rs.3,00,000/- loan issued to Mr. Kutumba Rao. The defendant or his relatives did not approach the plaintiff for payment of amount under deposit on maturity. The deposits matured long back. The plaintiff requested the defendant to pay the loan amount at least out of the deposit amount. But, instead of repaying the loan, the defendant insisted on payment of the deposit amount together with interest even though he was aware that interest would not accrue on deposits after maturity. The defendant was liable to pay Rs.3,00,000/- principal amount together with interest as per the loan terms. As such, the plaintiff got a legal notice issued on 17.11.1999 de