STATE OF ORISSA Vs. PUNJAB NATIONAL BANK

JUDGEMENT

(1.) The facts giving rise to the present appeals are briefly stated thus: The Punjab National Bank Ltd. (hereinafter referred to as the 'the bank') filed the suit, T. M. S. No. 79 of 1978), in the Court of the Subordinate Judge, Cuttack, against defendant No. 1, Udyog Silpa P. Ltd. (hereinafter referred to as 'the company'), and seventeen other defendants, defendants Nos. 2 to 18. Defendant No. 1 company was engaged in manufacturing iron pipes, fittings and allied materials and used to supply the same to the Government of Orissa (defendant No. 11) for being used by the public health department. The defendant No. 1 -company, as a constituent of the plaintiff -bank, was enjoying credit facilities from the bank to the tune of Rs. 1,00,000 against Government bills and cheques drawn in favour of the defendant -company towards the value of the manufactured iron goods supplied from time to time during the relevant period. The defendant -company, through its directors, entered into an agreement with the plaintiff -bank for enabling it to secure such credit facilities from the bank. One Golab Devi Jajodia and defendants Nos. 2, 4 and 7 executed deeds of guarantee(s) in favour of the plaintiff -bank agreeing to indemnify the bank to the extent of Rs. 4,00,000 so that the same may serve as sufficient security for the loans advanced by the bank to the defendant -company. In pursuance of the agreement between the parties, the defendant -company used to make over to the plaintiff -bank all its Government bills and cheques for collection from the Government During the relevant period, the defendant -company supplied its manufactured goods, to the Government, of a total value of Rs. 92,263.99 and made over the Government bills relating to the price of goods so supplied, to the plaintiff -bank for collection from the Government. On the strength of such bills, the plaintiff -bank was providing credit facilities to the defendant -company. The plaintiff -bank tried to realise the amount due to it from the company, by sending the bills of a total value of Rs. 92,263.99 in respect of the goods supplied by the company, to the Government for collection. The plaintiff -bank sent the said company's bills to the Government, and on behalf of the company demanded payment under the bills in respect of the goods supplied by the company to the Government. But the Government evaded making the payment under the bills on some pretext or other, in spite of repeated demands by the company and the bank for such payment. Hence, on July 22, 1969, the plaintiff -bank sent a notice, exhibit 40, under Section 80, Civil Procedure Code, to the Government demanding payment of the dues of Rs. 92,263.99under the bills sent to it for collection, but even after the receipt of the notice, the Government did not pay the amount. By April, 1970, under the cash credit account No. 519 of the defendant -company with the plaintiff -bank, a total sum of Rs. 94,641.86 was found due from the defendant -company to the plaintiff -bank towards principal and interest accrued due by that date. As the bank could not recover any part of that amount through the bills of the company sent to the Government for collection, the bank demanded of the company to repay that amount directly to them, but the company failed to do so. Hence, the bank filed the suit for recovery of Rs. 94,641.86 alleging that defendants Nos. 2 to 10, 17 and 18, as directors of defendant No. 1 -company, guarantors, for the sums advanced by the bank and as their successors -in -interest, are also jointly and severally liable for the repayment of that amount. Defendant No. 11 is the State Government of Orissa, defendants Nos. 12 and 15 are the oil collectors of Puri and Sambalpur respectively, defendant No. 13 is the chief engineer, P. H. D., Bhubaneswar, defendant No. 14 is the executive engineer, P. H. D. No. 1, Bhubaneswar and defendant No. 16 is the executive engineer, P. H. D., Sambalpur. The plaintiff -bank claimed that, in the facts of the case, defendants Nos. 11 and 16 are also jointly and severally liable to pay the suit amount of Rs. 94,641.86. The common plea of defendants Nos. 1 to 10, 17 and 18 is that as the defendant -company had made over its bills of a total value of Rs. 92,236.99 to the plaintiff -bank for collection, nothing more is payable to them under the cash credit account and as the non -recovery of the amount under the bills from the Government was due to the negligence of the bank, the defendants cannot be held liable for the same. The gist of the plea of defendants Nos. 11 to 16 is that as there was no privity of contract between the Government and the plaintiff -bank in the matter of supply of the goods in question by the defendant -company, there is no cause of action for the filing of the suit by the bank against them and the suit is, therefore, not maintainable and liable to be dismissed.

(2.) THE trial court, by its judgment and decree dated September 30, 1975, and October 9, 1975, respectively, decreed the suit against defendants Nos. 11 to 16 for Rs. 83,214.99 and against the other defendants for a sum of Rs. 11,426.87 with pendente lite and future interest at the rate of 6 per cent. per annum till realisation and directed that the costs and interest be proportionately distributed against the two sets of the defendants. Being aggrieved by the said judgment and decree passed against them for a sum of Rs. 83,214.99, defendants Nos. 11 to 16 preferred First Appeal No. 37 of 1976 making the plaintiff -bank as respondent No. 1, the company as respondent No. 2 and the other defendants as respondents Nos. 2(a) to 12. Defendant No. 1 -company and defendants Nos. 4, 5, legal representatives of original defendant No. 7, and defendants Nos. 17 and 18 preferred First Appeal No. 21 of 1976 against the judgment and decree holding them liable for payment of Rs. 11,426.87 making the bank as respondent No. 1, defendants Nos. 11 to 16 as respondents Nos. 2 to 7 and defendants Nos. 3, 8, 9 and 10 as respondents Nos. 8 to 11 respectively.

(3.) IT is on the findings on the above points in First Appeal No. 37 of 1976 that the result of the other appeal, i.e., First Appeal No. 21 of 1976 would depend. Hence, only the points raised in First Appeal No. 37 of 1976 are taken up for consideration in the first instance.