STATE BANK OF INDIA Vs. SAWHNEY FINANCE CO.

JUDGEMENT

(1.) This suit was instituted on November 8, 1974, by the State Bank of India to recover Rs.58,685.55 from M/s. Sawhney Finance Co. and seven other defendants. It was alleged by the plaintiff that M/s. Sawhney Finance Co. (defendant No. 1) was a partnership firm and Amrik Singh, Mrs. Rajinder Sawhney and Jaspal Singh (defendants 2 to 4) were its partners. The firm applied for cash credit facilities to the National Bank of Lahore, Delhi, and it was sanctioned an overdraft limit of Rs.2,00,000.00 Defendants Nos. 1 to 4 executed a cash credit agreement on November 29, 1968, on the security of the property and the conditions stated therein. They also executed an agreement of hypothecation by way of security for repayment of the amounts to be advanced to them and remaining unpaid. Amarjit Kaur, Joginder Singh, Harnam Kaur and Ravinder Singh (defendants Nos. 5 to 8) signed an agreement of continuing guarantee simultaneously and made themselves thereby jointly and severally liable to pay the amounts as should become due to the bank from defendants Nos. 1 to 4. The guarantors created, moreover, an equitable mortgage in favour of the bank by depositing the deed of their title to the property bearing Municipal No. XII/7819-20 (new)and No. 8671 (old) at Roshanara Road, Delhi, as collateral security in respect of the cash credit limit granted by the bank to defendant No. 1. Defendants Nos. 1 to 4 executed, again, a demand promissory note in favour of the National Bank of Lahore for a sum of Rs.2,00,000.00 to be paid with interest at the rate of 8 per cent. above the Reserve Bank of India rate subject to the minimum of 13 per cent. per annum with monthly rents. It was undertaken by the defendants to pay the amount owed by them to the bank under the promissory note without its presentation for payment. They also executed a letter of continuity on the said date.

(2.) The National Bank of Lahore was amalgamated with the State Bank of India in 1970 and in consequence the State Bank of India became entitled to all the rights, interests, etc., of the National Bank of Lahore. On the change of the situation in this manner the borrower-defendants submitted to the plaintiff a revival letter dated November 27, 1971, acknowledging and renewing their liability under the demand promissory note dated November 29, 1968, so as to keep it in force with all the connected securities, agreements and obligations. They confirmed on the same date the fact that a sum of Rs.89,183.74 was due to the bank as on November 6, 1971. The guarantors also confirmed, vide their letter dated November 27, 1971, the correctness of the aforesaid debit balance and they further acknowledged their liability in terms of the guarantee dated November 29, 1968, keeping it in full force and effect. The borrower-defendants were irregular in payments and they did not discharge their liabilities in spite of demands. After making adjustments for all the payments made by them the plaintiff-bank found that a sum of Rs.58,685.55 was owed to it by the defendants and it filed, therefore, a suit to recover that amount. It prayed to the court that a decree be passed in its favour on the following terms:

(3.) In their written statement the defendants contended that the suit was barred by time; that it was liable to be dismissed also because the National Bank of Lahore had been guilty of breach of the terms on which the loan had been advanced to the defendants; that out of the amount in suit, Rs.47,294.00 was interest only and the plaintiff was not entitled to recover any interest on the principal amount of Rs.11,391.00; that the National Bank of Lahore as well as the State Bank of India broke the terms of the agreement by stopping the loan facilities abruptly on January 10, 1970, and they had no right to charge any interest whatever from the aforesaid date; that the plaintiff had failed to give credit to the defendants in respect of the marginal guarantee amount along with interest up to date due by it to M/s. Dharam Singh Babek Singh, a sister concern of the defendants, and if credit be given for that amount nothing would be found payable to the plaintiff. It was contended, moreover, that the plaint had not been signed and verified and the suit instituted by a duly authorised person.