PRASANJIT MAHTHA Vs. UNITED COMMERCIAL BANK LTD

JUDGEMENT

(1.) This is a plaintiff's appeal arising out of a suit for declaration that the decree passed against his father (Pashupati Nath Mahtha) in Money Suit No. 17-B of 1958 by the 5th Additional District Judge, Nagpur, was not binding on him and could not be enforced against the properties falling to his share on partition, as the debt in question for which the decree was passed was Avyavaharika. The plaintiff being a minor, instituted the suit in question through his maternal uncle. In order to appreciate the question falling for our consideration, I may state the relevant facts in brief.

(2.) In the town of Muzaffarpur, lived one Shri S. N. Mahtha. He had two sons, namely, Rabindra Nath Mahtha and Pashupati Nath Mahtha, the father of the plaintiff. Undisputedly, a private limited company, namely, the Central Hindusthan Industrial Corporation (Private) Ltd. was started at Nagpur, in which the plaintiff's father was one of the directors. On 17th February, 1955, the aforesaid company opened a cash credit account with the defendant Bank at Nagpur. The original limit was only rupees five lacs, but this was raised from time to time. In September, 1955, it was first raised to Rs. 7.5 lakhs and on 25th February 1956, was further raised to rupees ten lakhs. According to the practice prevalent with the Bank, the defendant Bank in order to secure the loan under the above cash credit account, took a Demand Promissory Note for rupees five lakhs from the Company carrying interest at the rate of 6 per cent per annum with quarterly rests in its favour, besides (i) a Letter of Hypothecation and (ii) a Letter of Continuity on the same date. The Bank also took a Letter of Guarantee in its favour by the Directors and Principal Officer of the Company which was also executed by Shri Sri Narain Mahtha, guaranteeing the payment of the loan advanced to the defendant company. When the limits were raised, the aforesaid security documents were also suitably renewed from time to time in favour of the Bank. The Letter of Guarantee in question has been filed in this case and is Ext. C. It may be mentioned at this very place that the ancestors of the plaintiff were cloth importers when it was a controlled item. It also established a Cold Storage, namely, Himalaya Ice Cold Storage Company. Shri S. N. Mahtha was the Treasurer and Guarantee Broker of the Central Bank of India. This company, however, was floated for doing business in manganese, of course, a new venture for the family.

(3.) Shri S. N. Mahtha died on 16-10-1956. The remaining guarantors mentioned above, however, continued to be the guarantors of the defendant Bank in respect of the cash credit account in question, so much so that on the 1st July 1957, the Company executed fresh documents in respect of their liability in the cash credit account namely, a Demand Promissory Note for rupees ten lakhs to which all the Directors and principal officer mentioned above (impleaded as defendants 2 to 7 in the Bank's money suit in question) also joined along with the company. On that very day various security papers, namely, Letter of Continuity and Letter of Hypothecation, etc., were also executed in favour of the Bank whereby the defendants of the Bank's money suit undertook joint and several responsibility and liability for payment of any balance that might at any time be found due from them in the aforesaid cash credit account,