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Judgment
These two appeals arise out of judgment of the learned Single Judge in C.S. No. 388/1977. O.S.A. No. 11/86 is preferred by the defendants 6
& 7. O.S.A. No. 126/86 is preferred by the defendants 2 and 4. The plaintiff Bank of Baroda instituted a suit against the defendants 1 to 7 in the
Original side of this Court for recovery of a sum of Rs. 9,74,736.38 from defendants 1 to 5 and for recovery of a sum of Rs. 72,647.55, on
equitable mortgage, security furnished by the defendants 6 and 7. towards guarantee liability. The pleadings of the plaintiff and the defendants
summarised by the learned judge is as follows:
The first defendant is the firm, M/s. Raghava and Veera of which defendants 2 and 3 are the partners. The 1st defendant had banking facilities with
the Plaintiff. In 1970, the cash credit facility was increased to the limit of Rs. 8,75,000/- and the same was further raised to the limit of Rs.
9,00,000/-. Defendants 1 to 3 executed a promissory note on 13.7.1970 for Rs. 8,75,000/- undertaking to pay interest at 4 1/2% over the
Reserve Bank of India rate with a minimum of 9 1/2% per annum up to the limit of Rs. 3,75,000/- and for the amounts in excess of Rs. 3,75,00/-
with a minimum of 10 per cent interest. The first defendant also executed a letter of continuing security on 13.7.1970. Defendants 4 & 5 had
guaranteed the due repayment of the amounts advanced to defendants 1 to 3 and executed a letter on the same date. The second defendant had
deposited the title deeds and created an equitable mortgage for the prompt and due repayment of the amounts advanced to defendants 1 to 3.
Defendants 4 & 5 also have deposited their title deeds and created an equitable mortgage.
After the credit facility limit was raised to Rs. 9,00,000/- on 28.9.1972, a promissory note was executed on 28.9.1972, by defendants 1 to 3 and
defendants 4 and 5 had executed another guarantee letter for the enhanced limit of Rs. 9,00,000/-. Defendants 1 to 3 had written several letters
between 25.2.1971. and 7.1.1976, acknowledging their liability. At the request of defendants 1 to 3, the plaintiff had also extended the bank
guarantee limit to Rs. 30 lakhs. The subsisting guarantee amount on that date was raised to Rs. 15,67,500/- out of which Rs. 5,70.00/- had been
given on indemnity of insurance policy and the balance had been given on the counter-guarantee signed by defendants 1 to 3 in respect of the
guarantees issued and on the cash margin of 25 per cent. In respect of the guarantee issued on the cash margin of 25 per cent, defendants 4 & 5 as
well as defendants 6 and 7 had agreed that the four equitable mortgages created by them in respect of moneys due by Saravana Constructions and
Raghava and Veera Sons, respectively would enure as securities in respect of the guarantee liability incurred (sic.) to the plaintiff. The 4th
defendant and the 5th defendant had deposited their title deeds with the plaintiff on 10.8.1973. as security for the repayment of the amounts, that
might become due and payable by Sri Saravana Constructions. In like manner, defendants 7 (sic.) 7 who had deposited their title deeds on 9.7.70
had agreed that the equitable mortgage created by them would enure to the benefit of the guarantee liability (sic.) to the plaintiff in respect of the
first defendant. Thus the guarantee liability due to the plaintiff amounts to Rs. 72,647.55. Therefore, the Plaintiff is entitled to a decree for the
amount of Rs. 9,74,736.38 as against defendants 1 to 3 and for Rs. 72,647.55 as against defendants 4 to 7 in respect of the guarantee liability
given (sic.) to the plaintiff and also for a personal decree for the amounts, which could not be realised for the sale of hypotheca.
Defendants 1 and 2 have pleaded that the plaintiff must prove the amounts claimed in the plaint, that the promissory notes were executed only as
collateral security, that the interest claimed is excessive, that the stipulation for a payment of varying rates of interest would not make a promissory
note as a promissory note, that the 4th defendant is the wife of the second defendant and her signatures were obtained in a blank form, that the 4th
defendant did not execute the guarantee to the plaintiff, that the second defendant is entitled to have the right of marshalling securities and
contributions, that the 4th defendant did not create any equitable mortgage for the debts of defendants 1 and 2, that the bank guarantees are not
admitted and that the inclusion of the plaintiff bank accounts only that the suit claim is not sustainable.
A separate written statement has been filed by defendants 4, 6, and 7 stating that the 4th defendant did not execute the guarantee letter for the
due repayment of debts due by defendants 1 and 2, that the allegation of deposit of title deeds by defendants 4 and 5, is not correct, that the
execution of guarantee agreement on 28.9.1972 by defendants 4 and 5, is denied, that the 4th defendants has not acknowledged any liability, as
contended in the plaint, that defendants 4, 6 and 7 never entered into any agreement and did not agree for any extending equitable mortgage over
their properties for the guarantee amount claimed in the plaint.
On the above pleadings, the learned single judge framed as many as fifteen issues.
After considering the evidence on record, both oral and documentary, the learned single judge decreed the suit as prayed for, holding that the
defendants were liable in relation to the amounts due under the bank guarantee and that the defendants 6 and 7 were liable on the mortgage in
respect of liabilities of the first defendant which was restricted to Rs. 72,647.55. It is contended by Mr. T.R. Mani, the learned Senior Counsel
appearing for the appellants herein that a close scrutiny of evidence of P.W. 1. K. Srinivasan, Zonal Officer, Bank of Baroda, does not disclose
any evidence with regard to the items covered by bank guarantee. So, no case has been made out by the plaintiff and the plaint averments have not
been proved. Therefore the suit claim with regard to the bank guarantee has to be rejected. He also contended that the entries in regard to deposit
of title deeds were not made by way of equitable mortgage as alleged in three security registers marked as Exs. P16 to P18. The entry in Ex. P18
is only a self serving entry made by the bank after knowing that the accounts had become sticky and without any corroborative document. He also
contended that the Bankers'' Books of Evidence Act. 1891, will not gel attracted as far as the three security registers marked as Exs. P16 to P18
are concerned, as they are not Bankers'' Books. In any event, he contended that as far as the payment of interest is concerned, the same has not
been proved by the plaintiff. On behalf of the respondent in both the appeals, Mr. V.S. Subramanian contended that the judgment of the learned
single Judge is in accordance with law and the contentions now raised by the counsel for the appellant arc unsustainable and therefore, the same
should be rejected.
With regard to the first contention of the Learned Counsel for the appellants to the effect that a close scrutiny of the evidence of P.W. 1. K.
Srinivasan, Zonal Officer, Bank of Baroda does not disclose any evidence with regard to the items covered by the bank guarantee, he referred to
the following evidence of P.W. 1.
Q. Exs. P14 and P15 are the copy of the statement of accounts taken from your ledger, which you have certified under the Bankers'' Book of
Evidence Act?
A. Yes.
On the basis of the above evidence Mr. T.R. Mani, learned Senior Counsel appearing on behalf of the appellants, vehemently argued that the
plaintiff failed to establish the suit claim with regard to the guarantee and submitted that there is no legal evidence on the side of the plaintiff to prove
the claims as far as the guarantee is concerned. We are unable to accept the above contention of the Learned Counsel for the appellant. Even if we
reject the evidence of P.W. 1 the suit claim cannot be rejected as the same has been proved by the evidence of P.W. 1, P.W. 2, has categorically
stated in his evidence with regard to the guarantee. In this connection the learned single judge has observed as follows:
Since the Learned Counsel for the defendants 6 and 7 requested the bank to produce the security registers of the bank, P.W. 2. produced them
and true copies of the relevant pages pertaining to the suit transactions from the three security registers, marked as Exs. P16 to P18. Defendants 4
and 5 had deposited their title deeds in 1970 and has appeared before P.W. 1 on 10.8.1973 and agreed in extending the equitable mortgage in
relation to the guarantee liability also. There are entries in Ex. 18 that defendants 6 and 7, appeared before P.W. 1, and agreed on 14.8.1973 for
extending the equitable mortgage security in relation to the guarantee liability given by the bank on behalf of the first defendant.
We entirely agree with the above observation of the learned Single Judge and we reject the contention of the Learned Counsel for the appellant.
In the instant case, no doubt P.W. 1 has merely referred to the suit claim regarding guarantee but has not proved the entries in the security register
as per S. 34 of the Evidence Act. However, the plaintiffs have examined P.W. 2 who speaks about the guarantee and the entries in the books of
accounts and security registers. Thus, P.W. 2 has given a corroborative evidence as per S. 34 of the Evidence Act. We are of the view that the
evidence of P.W. 2 complies with the provisions of S. 34 of the Evidence act and the entries in Exs. P16 to P18 have been legally proved.
It was further contended by the Learned Counsel for the appellants that the entries with regard to the deposit of title deeds in the three security
registers will not be covered by Bankers'' Book Evidence Act, 1891. We are unable to accept the contention of the Learned Counsel for the
appellants. Section 2(3) of the Bankers'' Books Evidence At, 1891 defines Bankers'' Books"" as follows:
Bankers books'' include ledgers, day books, cash books, account books and all other books used in the ordinary business of a bank;
The term, bankers'' books'' is an inclusive definition. It is well settled that an inclusive definition has to be construed widely. In dealing with the
definition of ''Industry'' in the Industrial Disputes Act, 1947 in the case reported in State of Bombay v. Hospital Mazdoor Sabha (AlR 1960 SC.
610 at page 614), the Supreme Court has held as follows:
It is obvious that the words used in an inclusive definition denote extension and cannot be treated as restricted in any sense. Where we are dealing
with an inclusive definition, it would be inappropriate to put a restrictive interpretation upon terms of wider denotation.
In another case reported in Commissioner of Income Tax, Andhra Pradesh Vs. Taj Mahal Hotel, Secunderabad, the Supreme Court in holding
that sanitary and pipe line fittings in a building which is run as a hotel, fall within the word, ''Plant'' in S. 10(2)(vi.b) of the Income Tax Act, 1922,
has observed as follows:
The very fact that even books have been included shows that the meaning intended to be given to ''plant'' is wide. The word ''includes'' is often
used in interpretation clauses in order to enlarge the meaning of the words or phrases occurring in the body of the statute. When it is so used these
words and phrases must be construed as comprehending not only such things as they signify according to their nature and import but also those
things which the interpretation clause declares that they shall include.
We are therefore of the view that the security registers maintained by the plaintiff-bank with regard to the equitable mortgage will squarely come
within the definition of Bankers'' Book, given u/s 2(3) of ''Bankers'' Books Evidence Act, 1891, under the head, ""All other books used in the
ordinary business of a bank"". The security registers are obviously books used by the plaintiff bank in the ordinary course of business. We,
therefore reject the contention of the Learned Counsel for the appellants to the effect that the entries with regard to the deposit of title deeds in the
three security registers will not be covered by Bankers'' Book Evidence Act, 1891.
Lastly, it was contended by the Learned Counsel for appellants that the plaintiffs have not proved the rate of interest. The Learned Counsel for
the appellant referred to the plaint averments in this regard and submitted that the plaintiff claimed interest at 4-1/2 per cent over the Reserve Bank
of India rate with a minimum of 9-1/2 per cent per annum in respect of Cash Credit facility of Rs. 3,75,000/- and over and above the sum of Rs.
3,75,000/- at the rate of 5% over the Reserve Bank of India rate with a minimum of 10 per cent interest and at 18 per cent per annum on the sum
of Rs. 72,647.55. The defendants have denied the rate of interest in their written statement as follows:
The allegations in para 14 that the interest rate was increased to 16-1/2 percent with quarterly rests is denied. It is submitted that a contract to pay
with specific rate of interest cannot be varied by an unilateral act on the part of the plaintiff. The increased rate of 16-1/2% claimed by the plaintiff
in respect of the out standings and the quarterly rests claimed are not valid. The claim is illegal. It is unenforceable. The allegations in para 15 that
there was acknowledgment of liability on the various dales mentioned therein are denied.
The substance of the contention of the Learned Counsel for the appellants is that the respondent-bank had not proved the rate of interest A perusal
of the evidence of P. Ws. 1 and 2 shows that the bank failed to prove the rate of interest as averred in the plaint. They have not proved that was
the rate of interest charged by the Reserve Bank of India during the material time, to calculate the interest at 4-1/2 or 5 per cent per annum over
and above the Reserve Bank of India rate with a minimum of 9-1/2 or 10 per cent per annum, if the amount exceeds Rs. 3,75,000/-. We
therefore, hola that the respondent bank has failed to prove the contractual rate of interest chargeable on the suit transaction during the material
time. Accordingly, the plaintiff-respondent bank will be entitled to interest on the principal amount at the rate of 10 per cent per annum as the
amount advanced by the bank exceeds Rs. 3,75,000/- with regard to cash credit facility and with regard to interest, on a sum of Rs. 72,647.55
regarding the guarantee liability, the rate of interest will be 18 per cent per annum till the date of decree and thereafter at the rate of 10 per cent per
annum from date of payment. Subject to the above modification with regard to the date of decree till date of payment. Subject to the above
modification with regard to the payment of interest, both the appeals are dismissed. Upon the facts and circumstances of the case, there shall be no
order as to costs.
The OSA. Nos. 11/86 and 126/86 having been posted this day along with CMP. Nos. 11434 & 11435/93 in the presence of the said Advocates
the Court made the following Order:
Mishra, J.—Heard. We are satisfied that there is a clerical mistake in our judgment in the sense that in the operative portion of the judgment
we have said ""accordingly the Plaintiff/respondent bank will be entitled to interest on the principal amount at the rate of 10 per cent per annum as
the amount advanced by the bank exceeds Rs. 3,75,000/- with regard to cash credit facility and with regard to interest, on a sum of Rs.
72,647.55. regarding the guarantee liability, the rate of interest will be 18 per cent per annum till the date of decree and thereafter at the rate of 10
per cent per annum from the date of decree till date of payment. The trial Court however, has granted final decree and interest till the final decree
and after the final decree till payment. We have in our judgment found that the rate of 10 per cent per annum instead of 16-1/2 per cent per annum
on Rs. 3,75,000/- will be a proper rate of interest, and left the interest granted by the trial court on the sum of Rs. 72,647.55 as it has allowed the
interest on the above said sum till the final decree. Thereafter, it appears that the trial Court granted only 6 percent per annum interest and we
instead, have granted 10 per cent per annum by mistake. Since there is no quarrel as to the above we are inclined to amend the operative portion
10 read as follows:
Accordingly, the plaintiff/respondent Bank will be entitled to interest on the principal amount at the rate of 10 percent per annum as the amount
advanced by the bank exceeds Rs. 3,75,000/- with regard to cash credit facility and with regard to cash credit interest, on a sum of Rs. 72,647.55
regarding the guarantee liability, the rate of interest will be 18 per cent per annum till the date of final decree and thereafter at the rate of 6 percent
per annum from the date of final decree till the date of payment Subject to the above modification with regard to the payment of interest, both the
appeals are dismissed. Upon the facts and circumstances of the case, there shall be no order as to costs.