STATE BANK OF INDIA Vs. SURESH KUMAR

JUDGEMENT

(1.) State Bank of India filed this suit for the recovery of Rs.1,36,123.00 against Shri Suresh Kumar and others based on the facts that defendantNo. 1 Suresh Kumar borrowed money from the plaintiff bank for the purchase ofa TATA open truck model 1980. On the request of defendant No. 1 and on theguarantee being furnished by defendant No. 2, a Medium Term Loan of Rs.l,45,000.00 was sanctioned favouring defendant No. 1. The said truck afterpurchase was to be hypothecated with the bank as security. The bank was to charge interest at the rate of 4% per annum below State Bank of India's Advance Rate witha minimum of 12.5% per annum. The said truck was comprehensively ensured withdefendant No. 3 i.e. the New India Assurance Co. Ltd. It was insured in the nameof defendant No. 1. and the plaintiff bank was shown as the pledgee of the vehicleas interested party. Defendant No. 2 pledged his special term deposit receipt forRs. 45,000 / - with the bank. It was duly discharged in favour of the plaintiff creatinga lien in favour of the bank. Usual and necessary banking documents were gotexecuted from the defendants. Term Loan was to be repaid in monthly instalmentsof Rs. 3,625/- each. But the defendnats failed to adhere to the same. On or about1st week of November, 1981, defendant No. 1 reported that the truck had beenstolen/lost. An FIR was lodged with Police Station Mehrauli, New Delhi. Claim was lodged with defendant No. 3 for the reimbursement of the loss suffered onaccount of truck in queson being stolen. Defendant No. 3 refused to makepayment inspite of all formalities having been completed. Police Station Mehrauliissued 'No Trace Certificate' about the lose of this truck. This was communicatedto defendant No. 3. The defendant No. 3 did not settle the claim nor the MediumTerm Loan has been returned by the defendants 1 and 2. Hence the plaintiff afterdue notice adjusted and appropriated the Special Term Deposit deposited bydefendant No. 2 and for the balance outstanding amount, the present suit has beenfiled.

(2.) Defendants 1 and 2 in their written statement took the plea that the entireresponsibility for making payment was that of the Insurance Company as the truckwas insured with the said defendant. After it was declared by the police nottraceable and it having been lost, defendnt No. 3 being an Insurance Company became liable to make payment. The authority of the person who filed the suit hasbeen denied. It is their case that the plaintiff bank could not encash the Special TermDeposit Receipt amounting to Rs. 45,000/- because the said defendant was notliable in any manner for the loss of the truck.

(3.) The Insurance Company defendant No. 3 has challenged the locus standiof the plaintiff bank on the ground that there did not exist any privity of contract.Moreover, defendant No. 3 stood discharged as soon as the claim preferred bydefendant No. 1 was withdrawn by him. Defendant No. 1 being a policy holder discharged the Insurance Company by withdrawing the claim of the loss. As theclaim stood withdrawn by the policy holder, the Insurance Company stoodabsolved from the liability.