INDIAN BANK Vs. V R VENKATARAMAN

JUDGEMENT

(1.) This appeal is directed against the judgment and decree dated 24-6-1991 passed in O.S.No. 106 of 1988 on the file of the Additional Subordinate Judge, Chittoor, dismissing the suit against defendants 2 and 3 which has been filed on the strength of an alleged mortgage of deposit of title deeds. The plaintiff is the appellant.

(2.) The facts that arise for consideration can be briefly stated as follows: On 25.8.1985 the first defendant, who is the first respondent herein, applied for credit facility for his arrack and toddy business. Defendants 2 and 3, being respondents 2 and 3 herein, agreed to provide necessary security and offered themselves to be guarantors on behalf of the first defendant to the plaintiff for payment of the amount advanced to the first defendant and they submitted the details of assets and liabilities to the plaintiff. The first defendant executed the guarantee agreement on 30-9-1985 in favour of the plaintiff. All the defendants on 30-9-1985 executed letters of lien and set off in favour of the plaintiff. On 30-9-1985 defendants 2 and 3 executed an agreements of guatantee in favour of the plaintiff. The 2nd defendant on 1-10-1985 deposited title deeds in respect of the properties described in A Schedule with an intention to create a valid equitable mortgage over the said property. The deposit of title deeds on 1 -10-1985 has been confirmed by the letter dated 3-10-1985. The 3rd defendant also deposited his title deeds in respect of B Schedule properties on 1-10-1985 executed guarantee agreement on 30-9-1985. The deposit of title deeds by the 3rd defendant has been confirmed by the plaintiff by letter dated 3-10-1985. The 1st defendant requested the plaintiff bank for the issue of bank guarantees in favour of the Excise Department valid for a period of 15 months, with 30% cash margin in the form of fixed deposit and 1% commission for 15 months. The plaintiff bank issued guarantee No.12/85 for a sumof Rs.26,65,788-02 towards two months rental during the excise year 1985-86 and guarantee No.12-A/85 for Rs.2,18,915-00 being the MGQ deposit to lift MGQ of 4,37,839 liters of arrack during the excise year 1985-86. The 1st defendant also pledged with the plaintiff the fixed deposit FDR No.138665 dated 20.9.1985 for a sum of Rs.8,65,450/- for 15 months due on 30-12-1986. For failure to pay the rentals by 20-7-1986 for the month of July 1986, the Excise Superintendent invoked the bank guarantee No.12/85 on 21-7-1986 for the payment of Rs. 13,32,894.01 Ps. The plaintiff also foreclosed the FDR pledge towards the margin amount towards guarantee to the extent of Rs.9,14,869-56 Ps., inclusive of interest of Rs.49,419-56 Ps. As the amount for rental is not sufficient, the plaintiff remitted one month rental to the Excise Department after debiting the balance amount of Rs.4,18,024.45 Ps., to the defaulted guarantee account of the 1st defendant. The 1 st defendant also failed to pay rentals for the succeeding month of August 1986, the Excise Superintendent by his letter Rc.No.1014/86A dated 20-8-1986 invoked the bank guarantee No, 12/85. There was no amount available in the account of the 1st defendant. The plaintiff on 26.8.1986 paid the sum of Rs. 13,32,894.01 Ps., to the Excise Department towards one month rental due for the month of August, 1986 and debited the said amount also the defaulted guarantee account of the 1st defendant. As such a sum of Rs.17,50,918-46 Ps., has been debited in the defaulted guarantee account of the 1st defendant. The plaintiff issued notice on 20-11 -1986 demanding the amount of Rs. 15,68,078.25 Ps., with interest at the rate of 17.5% from 24-7-1986 to 31-3-1987 along with 2% penal interest and from 1-4-1987 interest at the rate of 16.5% with 2% penal interest. The defendants did not give any reply. Thereupon, the plaintiff filed the suit against the defendants for realization of the amount of Rs. 16,94,404.00.

(3.) The 1st defendant remained ex parte. The 2nd defendant filed the written statement contending that the 1st defendant made an application for credit facility on 25-8-1985. He obtained loan application from the plaintiff and filled the same in his own hand with all particulars at the house of the 2nd defendant. He mentioned the names of defendants 2 and 3 in the said application. It was only after the plaintiff considered the application and agreed to provide credit facilities to the 1st defendant, he approached her at the instance of her husband. It is further contended that encumbrance certificate was secured at the instance of the plaintiff and title deeds of the property were sent to the plaintiff to enable him to seek opinion from its counsel regarding the validity of the title deeds. It is also contended that the plaintiff approached her and informed that the 1 st defendant applied for credit facility for a sum of Rs.20,00,000/- as per his application and that she should provide her property as security for the said amount. The 2nd defendant told the plaintiff that she was willing to offer her property as security only to an extent of Rs.10,00,000/- if only the plaintiff agreed to reduce the terms and conditions of the contranct in writing. Thereupon, the plaintiff brought two printed forms and took her signatures on several other stamp printed and typed written forms on 2-9-1985 itself. The plaintiff's counsel gave his opinion and asked the plaintiff to retain the title deeds that were given for legal opinion on the same day. It is further contended that the plaintiff while entering into the agreement took her signatures on printed letter of lien on 2-9-1985 itself and while taking her signatures in the agreement of guarantee the plaintiff took her signature in the second form of agreement of guarantee on the plea that the duplicate form was to be sent to the Central Office for record as such the duplicate form would be filled up for clarity in type writing in accordance with the original form in which the 2nd defendant had specified her limit of liability. It is also further alleged that the plaintiff took signatures on several other stamped and printed and type written formats on 2-9-1985 itself, the day on which the contract of bargain and the deposit of title deeds with the plaintiff were simultaneously made evidencing a single transaction. The 2nd defendant denied the allegation about the letter dated 3-10-1985 containing her intention of creating an equitable mortgage by deposit of title deeds. It is also contended that the transaction, which has been reduced into writing, namely, agreement of guarantee, requires registration as it creates interest in the immovable property. It is also contended that the whole suit is based on invalid and manipulated documents and sought for dismissal of the suit.