HARISH C BHASIN Vs. BANK OF BARODA

JUDGEMENT

(1.) THE present appeal is filed by the two appellants for setting aside the judgment and decree dated 4th November, 2004 passed by the Additional District Judge whereby the suit filed by the respondent no.1 bank for recovery of ' 7,16,505/- and pendente lite and future interest thereon @ 16 p.a. has been decreed against the appellants as the principal borrowers and respondents no. 3-5 as their guarantors.

(2.) THE relevant facts giving rise to the present appeal culled from the pleadings of the parties, evidence adduced by them and the submissions made during the course of hearing of this appeal by the counsel for the are that on 2nd January,1981 appellants and respondent no.-1 bank appellant no.1, Harish Chandra Bhasin, as the sole proprietor of appellant no. 2, Raja Ram Bhasin and Co., was sanctioned cash credit facility of ' five lacs by the Traders' Bank Ltd.(which subsequently in May,1988 had got amalgamated with Bank of Baroda). At that time appellant no.1 had signed usual loan documents and had also pledged some shares with the bank as security. Account no.84 was opened in the name of appellant no.2 on 2nd January,1981 itself and thereafter the appellants had been withdrawing and depositing money in their said account from time to time. THEy had vide their letter dated 8th January, 1983, written to the Traders' Bank, admitted that a sum of ' 6,79,815.40 was correctly reflected in their account to be payable by them as on 31st December, 1982. However, in January 1983 the appellants wrote a letter to the Traders' Bank that the credit facility was given to them not for themselves but to accommodate bank's valuable customer P.S.Jain Motors(respondent no.5 herein) and so money due in the cash credit account should be recovered from P.S.Jain Motors THEreafter also the appellants had written similar similar letters to the Traders' Bank but the Bank had been continuing to demand money from the appellants lying outstanding in their cash credit account while denying the appellants' claim that they were not liable to re-pay the money due to the bank in their account.

(3.) DEFENDANTS no. 3 to 5 also contested the suit by filing a joint written statement which was signed on behalf of defendant no. 3 by one of its Directors Sh. R.C. Jain and on behalf of defendants no.4 and 5 by one Sh. Prabhash Jain as a partner of defendant no. 4 and Director defendant no. 5. It was pleaded by these defendants, inter alia, by way of preliminary objections that the plaintiff bank had no cause of action against them and further that the suit was in any case time barred. On merits, it was pleaded by these defendants that they were availing of credit facilities extended to them by the Traders' Bank Ltd. through its branch at Jallandhar till 20th November, 1987 when suddenly the operation of their accounts was suspended on the ground that the Reserve Bank of India had imposed a moratorium due to which their entire business came to a standstill. When the Traders' Bank Ltd. got merged with the plaintiff bank they became very anxious for revival of their business and so they had approached the plaintiff bank for the revival of their credit facilities and after negotiations and talks with the officials of the plaintiff bank the officials of the bank coerced them to give letter dated 31st May, 1988 undertaking therein to have the account of Raja Ram Bhasin and Co. also regularized and the defendants were also asked to execute a bond of guarantee in respect of the account of defendant no. 1 otherwise the credit facilities being availed of by them shall not be revived. Since the defendants 4 and 5 were facing dire financial constraints and their business had come to a standstill they gave letter dated 31st May, 1988 on the terms and lines suggested by the officials of the plaintiff bank the plaintiff bank also got executed a bond of guarantee from defendant no. 3, a sister concern of defendant nos. 4 and 5, and also got mortgaged its land but even then their credit limits were not revived and consequently the commitments made by them in the letter dated 31st May, 1988 of defendants 4 and 5 and in the bond of guarantee dated 6th October, 1988 executed by defendant no.3 in favour of the plaintiff bank became illegal and void being without consideration and consequently unenforceable in law.