CANARA BANK Vs. JAIN PLASTIC MOULDERS

JUDGEMENT

(1.) This is a suit filed by the plaintiff bank for recovery of Rs. 8,78,306.40 p. It is alleged that defendant No.1 is the proprientorship concern of Mr. S.K. Jain. He approached the Bank for grant of credit facilities and an advance of 'Rs.1,96,000.00 was sanctioned by the Bank for the purchase of the machinery. The loan amount along with interest @ 13.5% per annum was agreed to be repaid in 47 monthly instalments of Rs. 4,100.00 and last 48th instalment of Rs. 3,300.00. The cost of machinery amounting to Rs.1,96,000.00 was paid by the plaintiff to the suppliers M/s.Guru Ram Das General Industries, Mayapuri, Delhi at the instance of the defendant no.1 towards the cost of the machinery. Defendants No. 2 and 3 guaranteed the repayment of the loan. It is further alleged that Defendant no.2 had mortgaged his immovable property bearing House No. 700-C/43, Shambu Nagar, Tri Nagar, Delhi by depositing the title deeds creating security for repayment of ultimate balance in their machinery loan and Cash Credit Limit hypothecation accounts together with upto date interest and all other charges. Defendants failed to pay the instalments regularly and committed defaults in repayment of loan. The defendants utilised the machinery and subsequently same was shifted to some unknown place without knowledge of the Bank. On 26th October, 1993 a sum of Rs.1,68,479.80p was found due and payable by the defendants jointly and severally to the Bank. The defendants acknowledged their liability on 28th October, 1990 and 3rd September, 1993.

(2.) It is also alleged that the first defendant was also allowed credit facilities of Rs.2.00 lacs in the form of a cash credit limit which was enhanced to Rs.3.00 lacs. To secure the repayment of the advance by way of the cash credit limit, on 25th February, 1989 defendants executed in favour of the Bank, a demand promissory note for Rs.3.00 lacs agreeing to pay the loan amount along with interest @ 5.5% per annum over the bank rate with minimum of 15.5% per annum with quarterly rests; Cash Credit (Open Loan) agreement, hypothecating all raw materials, semi finished and finished goods, and all commodities belonging to the defendants, letter of request for overdraft facility; Defendants 2 and 3 also executed continuing guarantee . whereby they guaranteed in their personal capaty the due repayment all advances upto Rs. 6,15,000.00with interest thereon and costs. The guarantees included both accounts.

(3.) It is alleged that the account became sticky and the defendants did not adhere to the financial discipline. They failed to submit their stock statements periodically and truly. They did not route their sale proceeds through this account. Stocks were depleted and, in fact, on certain stages the stocks were not available at all. The plaintiff Bank took up the matter with the defendants number of times. It was pleaded that after adjusting all deposits made in the cash credit hypothecation on 26th October, 1993 a sum of Rs.7,09,826.60p was due and payable by the defendants jointly and severally to the plaintiff bank and that the plaintiff bank is entitled to charge interest at the rate of 22.25% per annum to be compounded quarterly from the defendants from 26.10.93 i.e. the date of institution of the suit till the date of final realisation of the decretal amount and that the plaintiff is entitled to recover interest from the defendants at the above stated rate under section 21-A of the Banking Regulations Act, 1949. On 2nd November, 1992 plaintiff bank served a notice on the defendants calling upon them to clear the accounts but they failed to make any payment.