CENTRAL BANK OF INDIA, A BODY CORPORATE CONSTITUTED UNDER THE PROVISIONS OF BANKING COMPANIES (ACQUISITION AND TRANSFER OF UNDERTAKING) ACT, 1970 REPRESENTED HEREIN BY ITS MANAGER, SRI S. GOPALAKRISHNA MURTHY Vs. KARNATAKA STATE FINANCIAL CORPOR

JUDGEMENT

(1.) THIS appeal filed by the first defendant is directed against the Judgment and Decree dated 24.08.1996 passed by the IV Additional City Civil Judge at Mayo Hall, Bangalore in O.S. No. 10280/1987 whereby the plaintiff's trait for recovery of a sum of Rs. 7,69,280.73 is decreed with costs and current and future interest at 15% per annum.

(2.) FOR the sake of convenience, the parties shall be referred to in terms of their statue before the Trial Court as plaintiff "Corporation", 1st defendant - "Bank" and 2nd defendant - "Company".

(3.) ACCORDING to the plaintiff, the second defendant which is a Private Limited Company had applied for two terra loans with the plaintiff for setting up of a Small Scale Industry at Plot No. 125/B, Boramasandra Industrial Area, Anekal Taluk, Bangalore District, for manufacture of non -metallic zip fasteners by letter dated 2.8.1982 (Ex.P.1). The plaintiff, by letter dated 4.8.1982 (Ex.P.4), wrote that the said request was under consideration. Subsequently, the plaintiff - Corporation auctioned two term -loans of Rs. 20.40 Lakh and Rs. 5.60 Lakh under communication of sanction dated 15.11.1982 (Ex.P.2) and 22.12.1983 (Ex.P.12) which were accepted by the second defendant company. Since the Company had to import Zip making machinery from Japan, for which foreign exchange to an extent of US $ 132234 was required it sought for an import licence from Government of India and opened a Letter of Credit with defendant No. 1 bank, bearing No. BLR.44/23? dated 14.11.1982. The Company requested the Corporation to issue a letter indicating its willingness and also to commit for release of the amount directly to the bank. Accordingly, the Corporation by letter dated 1.12.1982 informed that it would release Rs. 12.48 Lakh on the receipt of relevant dispatch documents, subject to certain terms and conditions, Subsequently the bank by Certificate dt.15.12.1982 (Ex.P.5) certified about the opening of the Letter of Credit by the company in favour of Murao and Co. Ltd., Osaka, Japan, for import of machinery for manufacture of 2ippers. Based on this assurance, the Corporation issued a cheque for Rs. 16,57,648/ - bearing No. 640417, dt.27.9.1982, drawn in favour of the Bank, Cantonment Branch on Canara Bank, South circle, Bangalore 560001, which was utilised for retiring documents of imported machinery belonging to the Company and the Bank acknowledged the receipt of the said cheque by its letter dated 30.09.1983 (Ex.P.10).