Mr. Shanthilal Jain vs The United Western Bank Ltd. and Mr. Subhash Kumar Jain V.S. Paper Agencies

V.G. Sabhahit, J.—This appeal is filed by Defendant No. 3 in O.S. No. 11134/1995 on the file of XXVI Addl.City Civil & Sessions Judge at Mayohall, Bangalore being aggrieved by the judgment and decree dated 7-12-2004 wherein the suit filed by the Plaintiff-Bank (Respondent No. 1 herein) has been decreed entitling the Plaintiff to recover a sum of Rs. 5,75,564/- together with current and future interest at the rate of 16.5% p.a. on the said amount from Defendant Nos. 1, 2 and 3 jointly and severally from the date of suit till the date of its realization.

The material facts of the case leading up to this appeal with reference to the rank of the parties before the trial Court are as follows:

The Plaintiff filed O.S. No. 11134/1995 seeking recovery of Rs. 5,75,564/- together with interest and costs from Defendants-1 to 3 jointly and severally on 16-11-1995. It is averred in the plaint that Plaintiff is a joint stock company incorporated and registered under the Indian Companies Act, VII of 1913 and included in the Second Schedule of the Reserve Bank of India Act, 1934 having its registered office at Satara, Maharashtra State and a Branch at No. 11, 1st Cross, Gandhinagar, Bangalore 560 009. The first Defendant represented by its proprietrix Smt. Usha S Jain along with Defendants-2 and 3 availed cash credit advance facility of Rs. 50,000/- on 8-4-1988 which was enhanced to Rs. 1 lakh and further enhanced to Rs. 2 lakhs. The first Defendant availed the said cash credit facility and secured repayment thereof and executed Demand Promissory note dated 30-10-1990 agreeing to repay the amount as agreed with interest at 11.5% p.a. over and above the Reserve Bank of India, official, rate of interest with minimum of 21.5% p.a. with quarterly rests and also executed hypothecation agreement. The Defendants-2 and 3 guaranteed repayment of the said facility and stood as guarantors and executed general form of guarantee. The first Defendant failed to repay the amount as per the Schedule. Notice was issued to Defendants. Despite the same, amount was not repaid by Defendants-1 and 2. Defendant-3 managed to send back the notice sent to him under registered post acknowledgment due. The Defendants have acknowledged the debt and their liability to pay amount to the Plaintiff-Bank by letters dated 21-8-1991, 13-7-1934 and 25-5-1995 and therefore suit was filed for the above said relief.

Defendants-1 and 2 had served with notice but they did not appear before the trial Court and they were placed exparte. Defendant No. 3 appeared and filed written statement averring that suit is liable to be dismissed since third Defendant has not signed any papers nor has stood as guarantor to the cash credit facility and the loan said to have been availed by first Defendant. It is further averred that signature found on the alleged general form of guarantee, which is stated to have been signed by the third Defendant, is not his signature and in fact, Defendant Nos. 1 and 2 in collusion with Bank Officials seem to have created the documents. The proceedings have been initiated by the Plaintiff before the Bangalore and Andhra Pradesh Debt Recovery Tribunal on the alleged loan availed by the first Defendant and even in the said suit, document is said to have been produced alleged to nave been signed by the third Defendant and the third Defendant got the document examined by a handwriting expert who had opined that signature therein was not the signature of third Defendant. He has further denied that he has acknowledged the debt as averred in the plaint and sought for dismissal of the suit.

Having regard to the above pleadings, following issues were framed:

(1) Whether Plaintiff proves that the Defendant No. 1 availed cash credit facility of Rs. 2,00,000/- from the Plaintiff?

(2) Whether the Plaintiff further proves that Defendant Nos. 2 and 3 agreed and guaranteed for repayment of loan of the last Defendant?

(3) Whether the Plaintiff proves that as on the date of filing of suit Rs. 5,75,564/- is due from Defendants to the Plaintiff and that each of the Defendants jointly and severally liable to pay the same?

(4) What Decree or Order?

On behalf of the Plaintiff, PWs.1 and 2 - Officer and Manager of the Plaintiff-Bank were examined and got marked the documents - Exs.P-1 to P-19. On behalf of the Defendants, Defendant No. 3 examined himself as D.W.1 and handwriting expert was examined as D.W.2 and got marked the documents Exs.-D-1 to D-12. The trial Court, after considering the contentions of learned Counsel appearing for the parties and after appreciating the oral and documentary evidence, answered the above issues in the affirmative and passed the following judgment:

The Plaintiff is entitled to recover a sum of Rs. 5,75,564/- (Rs. Five Lakh Seventy Five Thousand Five Hundred and Sixty Four only) together with current and future interest at the rate of 1.6.5% per annum on the said amount from Defendant Nos. 1, 2 & 3 jointly and severally from the date of suit till the date of its realisation.

Being aggrieved by the said judgment and decree, third Defendant has preferred this appeal.

We have heard the learned Counsel appealing for the Appellant and learned Counsel appearing for the Respondent-Bank.

The learned Counsel appearing for the Appellant submitted that the Appellant has not at all executed any guarantee bond and even as per the averment made in the plaint, the amount of cash credit being varied without the knowledge of third Defendant; that third Defendant has not signed any acknowledgment and he has proved that the signature found in the guarantee bond executed is not a signature of third Defendant in view of the opinion of the expert examined as D.W.2; that the trial Court has not properly appreciated the oral and documentary evidence on record and even otherwise, if this Court comes to the conclusion that judgment and decree passed by the trial Court is justified and that the Plaintiff has proved the claim, interest awarded is excessive.

The learned Counsel appearing for the Respondent-Bank submitted that evidence of P.Ws. 1 and 2 would clearly show that third Defendant has accepted guarantee agreement and also acknowledgment as averred in the plaint; that what was sent for opinion of the expert was the signature on the Vakalath filed in this case; and that third Defendant - Appellant herein is in the habit of making signatures in different way and in different cases. In the proceedings before the Debt Recovery Tribunal, he has signed as Shanthilal Jain whereas, in the present case, he has signed as Shanthilal and Appellant is in the habit of changing his signature in view of the contention which he would take in the suit, summons of which has already been served upon him, signature on the vakalath could not be said to be the admitted signature of the third Defendant. Therefore, opinion of the expert is not at all helpful to the Appellant in this case and the judgment and decree passed by the trial Court is justified and interest is awarded as per the contract agreed to between the parties and cannot at all be said to be excessive.

Having regard to the above said contentions, the points that arise for our determination in this appeal are:

(i) Whether the finding of the trial Court that the Plaintiff has proved that Defendant No. 1 had availed cash credit facility of Rs. 2 lakhs from the Plaintiff and Defendant Nos. 2 and 3 have agreed and guaranteed for repayment of the loan of first Defendant is justified or calls for interference in this appeal?

(ii) Whether the judgment and decree passed by the trial Court is justified or calls for interference in this appeal?

(iii) What order?

We answer the above points as follows:

(1) The finding of the trial Court is justified and does not call for interference.

(ii) The judgment and decree awarding interest at 16.5% p.a. current and future interest on a sum of Rs. 5,75,564/- is liable to be modified by reducing the rate of interest to 9% p.a. and in all other respects, judgment and decree passed by the trial Court is confirmed.

(iii) As per final order.

The learned Counsel appearing for the Appellant has taken us through the evidence of P.Ws.1 and 2 and the contents of Exs.P-1 to P-19 and also the evidence of D.Ws. 1 and 2 and the contents of Exs.D-1 to D-5.

We have given careful consideration to the contentions of learned Counsel appearing for the parries and scrutinised the material on record.

The material on record would clearly show that the fact that first Defendant had availed cash credit facility of Rs. 50,000/- in the year 1988 which was enhanced to Rs. 1 lakh and subsequently enhanced to Rs. 2 lakhs in the year 1990, in respect of which he executed on demand Promissory Note and also the loan agreement and hypothecation agreement is not in dispute as Defendants-1 and 2 though served with notice, have not chosen to contest the suit. However, the second Defendant against whom the order is passed has also not filed any appeal and therefore in this appeal filed by Defendant No. 3, what is required to be considered is whether the judgment and decree passed against the Appellant herein is justified or calls for interference as per the points for determination framed by us, both the points are considered together and answered for the purpose of convenience and to avoid repetition.

P.W.1 - Shashikanth M Dekhade was working as an Officer in the Plaintiff-bank in Gandhinagar Branch from 1989 to 1994. He has deposed that Defendant No. 1 along with other Defendants had availed cash credit facility of Rs. 50,000/- from his bank in the year 1988 which was later enhanced to Rs. 1 lakh and subsequently enhanced to Rs. 2 lakhs in the year 1990. Defendant No. 1 had availed cash credit facility by executing Demand Promissory Note on 30-10-1990 as per Ex.P-1 and as a security for the said loan, Defendant No. 1 hypothecated the stock consisting of silk sarees as per the agreement - Ex.P-2. Defendant Nos. 2 and 3 are the guarantors of the said loan and they have executed general form of guarantee as per Ex.P-3 in which, Defendant No. 3 has signed as per Ex.P 3(a). He has further deposed that Defendants have agreed to pay interest at 11.5% p.a. as per R.B.I rate subject to minimum of 21.5% p.a. in quarterly rests on dally balance. He has also spoken to about the default committed by the Principal debtor in repaying the amount and has produced the acknowledgment executed by Defendant No. 3 as per Ex.P-4 and has identified the signature of Defendant No. 3 as per Ex.P-4(a). A copy of the legal notice was produced as per Ex.P-7 and has stated that Defendant No. 3 though received notice, managed to return the sealed envelope by scratching his signature on the postal acknowledgement and he has produced the same as Ex.P-8. He has further deposed that Defendant''s account was treated as NPA and as per RBI direction, the interest accrued but not paid are not debited and he has produced the extract of the sheet as per Ex.P-13. Nothing has been elicited in his cross examination apart from suggesting that Defendant No. 3 has not at all executed the guarantee as per Ex.P-3 and that Ex.P-3(a) is not his signature but it is forged by Defendant Nos. 1 and 2 with the collusion of officers'' of the Bank. He has also stated that Defendant No. 3 had consented for enhancement before sanctioning the amount and he has the said letter. It is false to suggest that Defendant No. 3 never stood as guarantor and it is also false to suggest that No. legal notice was sent to Defendant No. 3 and that suit has been filed to harass Defendant No. 3 in collusion with Defendant Nos. 1 and 2.

P.W.2 - Mandan Narhar Thambekar was working as Branch Manager of the Plaintiff-Bank from 17-12-1994 to 14-10-1996. He has produced Ex.P-15 - power of attorney executed in favour of P.W.1. However, he has not spoken to about the transaction.

D.W.1 - Shanthilal - Defendant No. 3 (Appellant herein) in his examination-in-chief has reiterated that he has not signed guarantee agreement nor acknowledgment and that a false case has been foisted on him. He got marked the documents Exs.D-1 to D-3. He has also deposed that he has obtained opinion from the handwriting expert. It is elicited in his cross examination that his name is Shanthilal Jain, son of late C Premachand. He sign the documents as ''Shanthilal'' and he knows the Plaintiff-Bank from 1981 to 1988 and he had current account. However, from 1989 he has not operated the said bank account and hence it is a sleeping account. He had No. objection of any nature in respect of current account he had with the Plaintiff-Bank. Since he was having an account in State Bank of Mysore, he stopped to operate the current account he had with the Plaintiff. He does not know Defendant No. 1 but he knows Defendant No. 2. He was running partnership account business till 1992 and thereafter they have closed that firm as he was running the business under the name and style of V.S.Paper Agency. Defendant No. 2 was running a business next to his building wherein he was running his paper business. He knows Defendant No. 2 from the year 1981-82. He also knows that Defendant No. 2 was also having back account with the Plaintiff-bank. There was normal relationship with Defendant No. 2 and there was No. quarrel or misunderstanding between him and Defendant No. 2. He has denied a suggestion that on 30-10-1990 himself Defendant No. 1 and Defendant No. 2 approached the Plaintiff-bank for enhanced cash credit loan of Rs. 50,000/- to Rs. 2 lakhs. He does not knew whether the Plaintiff has sanctioned Rs. 2 lakhs on himself and Defendant No. 2 acting as guarantors. He has not signed general form of guarantee as per Ex.P-3 on 30-10-1990 and the signature found on Ex.''''?-3 does not belong to him. Similarly, the signature at Ex.P-4(a) does not belong to him. He knows about the Plaintiff filing the O.A. No. 1248/1995 against Defendant No. 1 and himself along with other Defendant before the Debt Recovery Tribunal and in that application also, he had pleaded that signatures found in the said documents were forged. After seeing the order sheet, application and vakalath, the same are marked in his cross examination as Exs.P-16 and 17. It is also true that criminal complaint filed against the Plaintiff has been dismissed and the Plaintiff preferred revision before the Sessions Court. He has denied a suggestion that he has signed the documents referred to and the guarantee agreement and he is deposing falsely to avoid his liability.

D.W.2 is a handwriting expert and she has spoken about comparison of Exs.P-3,4,5 vakalath Ex.P-17, written statement and memo of instructions and has given her report as per Ex.D-12. She has deposed that she has carefully examined and compared both the admitted and disputed signatures and on comparison, she was of the opinion that disputed signatures are not made by the person who made the admitted signatures. She has stated that detailed reasons are in the report at Ex.D-12. She was practicing as handwriting expert. It is elicited in her cross examination that she has got the proof to show that she was practicing as a handwriting expert and she has not produced any documents to that effect in the present case. To the question that signature portion in the vakalath of the Defendant (Appellant herein) is torned out, the answer given by her was that the paper was torned out on the portion of the disputed signature. She has not seen the original of Exs.P-16 and 17. She has denied a suggestion that undisputed signatures in the DRT proceedings were also referred for expert opinion and she has not given any report to the DRT, Bangalore. She has voluntarily deposed that the party has taken her opinion on the basis of xerox copies made available to her. She has denied a suggestion that the opinion is not based upon the material on record.

It is clear on appreciation of the above said oral and documentary evidence on record that the evidence of handwriting expert witness D.W.2 is not helpful to the Appellant - Defendant No. 3 in the suit as what was sent for comparison was Exs.P-3, 4, 5 and P-17. - vakalath, written statement and memo of instructions and much importance cannot be attached to the signature in the vakalath, written statement and memo of instructions as it is clear that vakalath has been executed and written statement is filed and memo of instructions was filed before the Court only after third Defendant decided about his putting signature on Exs.P-3, 4 and 5. No. other document which has undisputable and admitted signature was sent for comparison. On the other hand, the evidence of P.W.1 would clearly show that nothing has been elicited in his cross examination to disbelieve his evidence that Defendant Nos. 1, 2 & 3 have account in the Plaintiff-Bank and had enhancement of cash credit of Rs. 50,000/- and executed documents in the presence of P.W.1 and he has identified the signature of guarantee agreement as also the acknowledgement. It is also clear'' from the material on record that the Appellant is in the habit of describing his name differently on different occasions. Though he has described himself as Shanthilal Jain, he has signed as Shanthilal Jain in the guarantee agreement. He has admitted the documents in the proceedings before the Debt Recovery Tribunal to show that he has signed as Shanthilal. In view of the fact that the evidence of handwriting expert is not helpful to the present case to contend that signature on the documents - guarantee bond - Ex.P-3 and the letter Ex.P-5 has been denied apart from his own self serving statement, there is No. material whatever to show that the said signature has been forged by the Defendants-1 and 2 in collusion with the Plaintiff-Bank. The trial Court after appreciating the above said oral and documentary evidence, has rightly held that Plaintiff has proved that Appellant herein has executed guarantee bond which contains his signature and Appellant has failed to prove that signatures found in Exs.P-3.4 & 5 are not his signatures. On re-appreciating the entire material on record, we hold that finding of the trial Court that Plaintiff has proved that Appellant herein has executed loan revival letter is justified and does not call for any interference in this appeal.

However, in so far as rate of interest awarded towards current and future interests at 16.5% p.a. is concerned, having regard to the fact that Defendants-1 and 2 have been placed exparte and having regard to the fact that amount is calculated by imposing interest at 21.5% p.a. at quarterly rests and decree has been passed for Rs. 5,75,564/- as claimed in the suit before the trial Court and also having regard to the discretion that can be exercised by the Court regarding current and future interest, awarding of interest at 16.5% p.a. in the above said facts and circumstances of the case is excessive and the same is liable to be reduced to 9% p.a. and accordingly, to that extent, the judgment passed by the trial Court awarding interest at 16.5% p.a. towards current and future interest is liable to be reduced to 9% p.a. and in all other respects, judgment and decree passed by the trial Court has to be confirmed.

Accordingly, appeal is allowed in part. The judgment and decree passed by the trial Court decreeing the suit of the Plaintiff for Rs. 5,75.564/- is confirmed. However, awarding of current and future interest at 16.5% p.a. on the said amount is reduced to 9% p.a. and the judgment and decree in all other respects is confirmed. There shall be No. order as to costs.