SIMCO INDUSTRIES Vs. INDIAN OVERSEAS BANK

JUDGEMENT

(1.) The defendants in O. S. No. 6574 of 1983 on the file of XVII Assistant Judge, City Civil Court, Madras, are the petitioners and the plaintiff and the proposed party, are the respondents herein. The suit was filed for recovery of a sum of Rs. 85, 766.71 with interest thereon. The first defendant was manufacturing optical products, and the second defendant was its sole proprietor. The third defendant the son of the second defendant, had given a letter of guarantee for one lakh of rupees in favour of the plaintiff bank. The plaintiff bank extended several credit facilities and for amounts which still remain payable, the suit had been laid.

(2.) The defendants have stated in their written statement that, if proper adjustments are made, nothing would become payable. The third defendant stated that he has never stood as a surety. Pending disposal of the suit, I. A. No. 948 of 1984 was filed by the defendants under Order 8A, Civil Procedure Code, for issue of a third party notice to the Deposit Insurance and Credit Guarantee Corporation of the Reserve Bank of India stating that it had guaranteed the loan extended to them by the plaintiff bank, and that the premium for the insurance taken had been paid out of the funds of the first defendant by the plaintiff, and that the optical products sent to Andhra Pradesh to the extent of nearly a lakh of rupees could not be delivered due to Telegana riots, and as the loan had been insured against loss with the proposed defendant, they are entitled to be indemnified to the extent of Rs. 30, 000 and interest from October, 1973. The plaintiff opposed this claim by stating that, in a suit for recovery of amounts on a loan transaction, there is no need to implead the proposed party. The proposed party in a detailed affidavit would state that, there is no privity of contract between itself and the defendants, and under the scheme it has to protect only the bank for any loss suffered in extending financial assistance to the small scale industries, and they have never acted as a guarantor under section 126 of Contract Act, 1872.The court below held that the proposed party had already paid its liability to the extent of Rs. 42, 120.25 to the plaintiff, as per the agreed Scheme and that between the said corporation and the defendants, no agreement had been entered into, and, therefore, it is not necessary to implead it under Order 8A, Civil Procedure Code.

(3.) Mr. Venkatesan, learned counsel for the defendants, submits that, on the claim made that the corporation had already deposited its liability to the extent of Rs. 41, 000 by itself shows that it had acted as an insurer, and, therefore, the defendants having paid premium through the plaintiff bank, it can secure reimbursement from the corporation of whatever amount the plaintiff bank may ultimately recover from the defendants. He submits that the terms and conditions of the Scheme have never been made known, and its own statement about payment of Rs. 41, 000 would not absolve its liabilities and obligations, and hence, this is a fit case for invoking Order 8A, Civil Procedure Code.