CCCA/53/1997 of State Bank of India, Vs U.N. Govinda Rao, on 30 December 2014

JUDGMENT:

Aggrieved by the decree and judgment dated 20.12.1996, passed in OriginalSuit No.750 of 1976 by the II Additional Judge, City Civil Court, Hyderabad (for short,‘the trial Court’), the unsuccessful plaintiff therein preferred this Appeal.

2. For convenience of reference, the ranks given to the parties in Original SuitNo.750 of 1976 will be adopted throughout this judgment.

3. During pendency of the appeal, due to non payment of batta, the appeal wasdismissed for default against defendants 3, 4 and 6 to 10.

4. The plaintiff is the Nationalized Bank carrying on its banking business havingone of its branches at Agapura, Hyderabad. 1[st] defendant is the proprietor of NeoIndustries; 2[nd] defendant is the guarantor and defendants 3 and 4 are the children of2[nd] defendant, Narayana Rao, who died during pendency of the Suit. Subsequently,defendants 3 to 10 were impleaded as legal heirs of 2[nd] defendant vide separateorders in I.A. No.1250 of 1993 and 3 of 1994, dated 28.03.1994.

5. The 1[st] defendant being the proprietor of Neo Industries approached theplaintiff-bank for grant of loan under three accounts i.e., medium term loan to a limit ofRs.35,000/-, cash credit mundy type loan to a limit of Rs.35,000/- and over draft facilityto a limit of Rs.13,500/-, while the plaintiff-bank sanctioning all the three facilities,obtained necessary documents from the defendants 1 and 2. The 2[nd] defendant is theguarantor for payment of loan availed by the 1[st] defendant, who, as a security,deposited title deeds creating an equitable mortgage over the schedule property. The1[st] defendant hypothecated assets of the industry and stock-in-trade to the plaintiff-bank but the defendants failed to maintain the account promptly and committed defaultin payment of the debt due under three facilities referred supra.

6. The defendants utilized the facility for production of G.L.S. Lamps instead ofAuto Lamps, Radio Dail Lamps etc., and the plaintiff-bank among other letters, by aletter dated 08.08.1975 brought to the notice of defendants 1 and 2 about thecommission of various irregularities. Acknowledging receipt of the notice, the 1[st]defendant sent a reply dated 16.09.1975. Thereafter, the plaintiff-bank addressedseveral letters pointing out the irregularities committed by the defendants and calledupon them to liquidate the outstanding amount.

7. The plaintiff-bank locked the unit after taking an inventory of stock/assets of theindustry on 30.09.1975. On 01.10.1975, the plaintiff-bank addressed a registerednotice disclosing the latest position of the three accounts and called upon the 1[st]defendant to liquidate the amount due with a threatened action to auction the propertyseized by the plaintiff-bank for recovery of the outstanding amount. Thereupon, the 1[st]defendant gave a detailed reply promising to pay the debt due on or before December,1975.

8. As the defendants 1 and 2 failed to discharge the debt due to the plaintiff-bank,under three loan facilities, the plaintiff-bank, on 22.07.1976, auctioned only fewmachineries out of the assets of industry, taken possession and realized Rs.150/-which was appropriated towards part of the loan availed. After appropriating the saidamount, the total amount due to the plaintiff-bank was Rs.84,046-31 Ps.

9. As the defendants 1 and 2 failed to discharge the debt due to the plaintiff-bank,the plaintiff-bank is entitled to proceed against the property mortgaged by the 2[nd]defendant so also auction of the property seized by the plaintiff-bank for realization ofdue debt in terms of the agreement. Hence, the plaintiff-bank filed the suit for passinga preliminary decree for the suit amount fixing time for redemption of mortgage ofschedule property.

10. The 1[st] defendant filed written statement admitting of obtaining three loans, butdenied manufacturing of Auto, Radio Dial and Miniature Lamps etc., resisted the claimof the plaintiff-bank on the following grounds:

(a) The 1[st] defendant denied Medium Term Loan facility, Cash CreditMundy Type facility and Over Draft Facility availed by the 1[st] defendantwith the plaintiff-bank while contending that the 1[st] defendant, underMedium Term Loan facility, has withdrawn only Rs.19,000/-, underMundy Type facility had only withdrawn Rs.26,000/- but did not availOver Draft facility. Therefore, 1[st] the defendant is not liable to pay anyamount to the plaintiff-bank; (b) The 1[st] defendant denied commission of any irregularities pointed bythe plaintiff-bank in various letters and those letters were repliedappropriately;

(c) The machinery available in industry is useful for G.S.L. and autoranges and all the items which were manufactured were in completeknowledge of the plaintiff-bank and even the defendants informed thesaid fact in reply letter addressed to the plaintiff-bank. Therefore, the defendants did not violate the terms and conditions of the loanagreement; (d) The plaintiff-bank, without issuing any prior notice to the defendants,seized the property, and by auctioning the tools worth of thousands,realized only Rs.150/-, which is far below the actual rate and as such theauction was not properly conducted; (e) The 1[st] defendant pleaded ignorance about transfer of accounts fromone branch to the other branch etc., and denied his liability to pay thedebt due to the plaintiff-bank; (f)The proposed sale without the knowledge and intervention of thedefendants is illegal and prayed to dismiss the Suit.

11. The 2[nd] defendant filed written statement denying creation of mortgage bydeposit of title deeds for the liability of the 1[st] defendant and resisted the claim of theplaintiff-bank raising the following contentions:

(a) The 2[nd] defendant never received any letter from the plaintiff-bankabout putting lock to the unit and conducting auction of the machineryand stock and selling of heavy material at low price is illegal; (b) The title deeds are deposited only at the instance of the 1[st] defendantfor running the unit but on failure of the plaintiff-bank by locking the unitillegally, harassed the defendants deprived the 1[st] defendant to produceauto lamps etc., thus, on account of illegal action of the plaintiff-bank, theunit could not be run; thereby, the 2[nd] defendant cannot be made liable topay any amount and prayed to dismiss the Suit.

12. After impleading the legal heirs of 2[nd] defendant, 3[rd] defendant alone filed thewritten statement denying material allegations contending that the written statementfiled by the 1[st] defendant was drafted by the 2[nd] defendant, in a hurry, in his presence. In the said written statement, the 1[st] defendant did not explain his contentions, indetail, however, admitted that the 1[st] defendant utilized the amount borrowed from theplaintiff-bank under the loan accounts for his individual business and never spent anyamount for the purpose of 2[nd] defendant or for the other members of the family. The2[nd] defendant was only a guarantor and never received any amount, as such the dueamount cannot be recovered proceeding against his property and prayed to dismissthe Suit.

13. The 1[st] defendant filed additional written statement contending that the allegedmortgage is not valid and reiterated the contentions raised in the original statement.

14. Defendants 4 to 10 remained ex parte.

15. Basing on the above pleadings, the trial court framed the following issues and additional issues:

1. Whether the amount claimed in respect of three suit advances are trueand correct?

2. Whether the defendants executed the loan documents detailed inPara-8 of the plaint?Para-8 of the plaint?

3. Whether the plaintiff is not entitled to claim interest for all or any of thereasons stated in the written statement of the first defendant?reasons stated in the written statement of the first defendant?

4. Whether the auction held by the plaintiff is illegal, and if so, what is itseffect on suit transaction?

5. To what relief?

Additional Issues framed on 22.03.1995:

1. Whether the plaintiff is entitled to a decree against the 1[st] defendantonly as pleaded by the third defendant?

2. Whether the third defendant is entitled to the equitable relief prayed forin his written statement?

16. During course of trial, on behalf of the plaintiff-bank, G.

Simhachalam was examined as PW.1, marked Exs.A-1 to A-24. On behalf of thedefendants, 1[st] defendant himself was examined as DW.1, marked Exs.B-1 to B-20.

17. Upon hearing argument of both the counsel, considering oral and documentaryevidence available on record, the trial Court dismissed the Suit on the sole ground thatsale of the property without notice and failure to produce all the items seized disentitledthe plaintiff-bank to recover the amount, decided issue No.4 and additional issue No.1against the plaintiff-bank while deciding the other issues i.e., issue Nos.1, 2, 3 andadditional issue No.2 in favour of the plaintiff-bank.

18. Aggrieved by the decree and judgment of the trial Court, the plaintiff-bank,being unsuccessful before the trial Court, preferred the present Appeal on variousgrounds, mainly contending that dismissal of the Suit only on the ground that some ofthe items of property seized by the plaintiff-bank were not produced and they werefound missing itself is not sufficient to dismiss the Suit. Even according to the materialavailable on record, the value of the goods not produced by the plaintiff-bank after itsseizure is about Rs.50,000/-; at best the said amount can be deducted from the amountdue to the plaintiff-bank but the trial Court on erroneous appreciation of facts and lawdismissed the suit in toto and committed an error.

19. During course of argument, learned counsel for the plaintiff-bank would submitthat dismissal of the suit by the trial Court only on the ground of the plaintiff's inability toproduce the goods seized by it, which were hypothecated to the plaintiff-bank, cannotbe dismissed and dismissal of the suit for the said reason is unknown to law and,finally, prayed to allow the Appeal setting-aside the decree and judgment underchallenge by passing a preliminary decree in favour of the plaintiff-bank for realizationof the debt against the schedule property.

20. Per contra, learned counsel for the defendants-respondents argued totally insupport of the finding recorded by the trial Court, reiterating the contentions raisedbefore the trial Court, and prayed to dismiss the appeal confirming the decree andjudgment of the trial Court.

21. Considering rival contentions, perusing oral and documentary evidenceincluding the decree and judgment under challenge, the points that arise forconsideration are:

1) Whether auction of some of the tools seized by the plaintiff-bank islegal and valid?legal and valid?

2) Whether failure to produce machinery and tools of industry or stock-in-trade, hypothecated to the plaintiff-bank after their seizure, disentitled theplaintiff-bank to a preliminary decree for realization of the suit amountagainst the schedule property granting time for redemption to thedefendants?trade, hypothecated to the plaintiff-bank after their seizure, disentitled theplaintiff-bank to a preliminary decree for realization of the suit amountagainst the schedule property granting time for redemption to thedefendants?

22. POINT No.1: Admittedly, defendants 1 and 2 executed documents in favour ofthe plaintiff-bank including loan agreement and deposit of title deeds by 2[nd] defendant;the memorandum of deposit of title deeds creating mortgage over the scheduleproperty and also an agreement of hypothecation over the goods and machinery of theindustry of the 1[st] defendant is supported by Exs.A-1 to A-12. However, the plaintiff-bank admitted that for failure to pay the debt due to the plaintiff-bank, by the defendants1 and 2, seized the machinery and stock-in-trade, conducted an inventory on30.09.1975 kept under lock and key of the plaintiff. Ex.A-17 dated 30.09.1975 isthe inventory of raw material and finished goods. In Para No.9 of the plaint, the plaintiffadmitted that the plaintiff-bank, on 30.09.1975, locked the unit after taking an inventoryof the assets/stock and in the last eight lines of Para No.9, the plaintiff further admittedthat on 22.07.1976 conducted an auction of few machines, sold in public auctionrealized only Rs.150/- and the remaining machinery and stock etc., remained unsold.Thus, even after giving credit, the defendants 1 and 2 became due to pay an amount ofRs.84,046.31 Ps. Thus, there is no dispute regarding sale of part of the items seized, which were hypothecated to the plaintiff-bank. The trial Court framed issue No.4 withregard to the dispute about seizure of hypothecated goods and realization of Rs.150/-,appropriation of the same towards the part of the amount due, which was decided infavour of the defendants and against the plaintiff-bank on the ground that no intimationwas given to the defendants about the proposed auction of part of the articles seizedand that the auction was illegal.

23. In view of the admission in Para No.9 of the plaint, the undisputed fact is thatthe plaintiff-bank seized the goods, articles and machinery of the industry,hypothecated to the plaintiff-bank, and conducted auction of some of the items seized,realized Rs.150/-, credited the same to the loan account. PW.1 reiterated the said factin his evidence. The 1[st] defendant pleaded ignorance about the auction of part of theitems seized by the plaintiff-bank and realization of any amount while contending thatthe value of the items sold is far more than the amount realized. PW.1 admitted that thepossession of machinery and goods was taken by the plaintiff-bank on 30.09.1975under inventory list, marked as Ex.A-17, kept under the lock and key of the plaintiff. Inthe cross-examination, PW.1 admitted that the said auction was conducted by a privateauctioneer and no auction notice was brought on record before the trial Court forperusal and no document pertaining to the auction of the part of the movables seizedand realization of Rs.150/-. As such, the testimony of PW.1 is interested and, in theabsence of any material or the evidence of the private auctioneer, it is difficult for thisCourt to believe that the plaintiff-bank only realized Rs.150/-, more particularly, whenthe 1[st] defendant disputed about auction of part of the movables seized and its valueetc.,

24. In normal course of events, when the property was seized and proposed to beauctioned, it is the duty of plaintiff-bank to give prior notice notifying the date ofproposed auction of movables and serve a notice on the persons interested includingthe defendants herein. But, obviously for the reasons best known to the plaintiff-bank,no such notification was issued for sale of the part of movables seized and no noticewas sent to the defendants, who are interested in the property. Therefore, the auctionappears to be stage-managed and the legality of auction itself is doubtful. Hence, thetrial Court rightly concluded that the auction conducted by the plaintiff-bank is illegal.Even on reappraisal of entire evidence by this Court, being the first appellate Court,nothing new was found to establish that the value of the articles sold in the auction bythe private auctioneer at the behest of the defendants by plaintiff-bank and as suchfailed to produce any material evidencing auction of the movables seized. Thus, in theabsence of any material, it is difficult to hold that auction of the part of the movablesseized is legal. Even after discerning entire material on record, I find no iota ofevidence to arrive at a different conclusion than the conclusion arrived at by the trial Court. Even during argument, learned counsel for the plaintiff-bank did not bring to mynotice any other material which was not considered by the trial Court to believe theauction and the amount realized in the said auction. Hence, the auction conducted bythe plaintiff-bank through private auctioneer is illegal. In view of my foregoingdiscussion, the finding of the trial court is hereby confirmed, as I find no illegality in thefinding recorded by the trial Court warranting interference of this Court, holding thispoint in favour of the defendants-respondents and against the plaintiff-bank.

25. POINT No.2: The major ground for declining to pass a decree in favour of theplaintiff-bank is that as per Ex.A-17, several items of the property were seized by theplaintiff. As per Ex.A-17, 26 items of goods were seized from Neo Industries besidesseizure of 11 items of machinery, prepared inventory in the Court duly signed by theManager and Field Officer of State Bank of India, Agapura Branch and in the presenceof witnesses. Later, Commissioner was appointed in the rent control proceedings inE.A. No.100 of 1982 in E.P. No.30 of 1982 in R.C.C. No.178 of 1981 on the file of theCourt of II Additional Rent Controller, City Small Causes Court, Hyderabad for deliveryof possession of the premises belonging to Ariful Qaudir who filed R.C.C. No.178 of1981 for eviction of the 1[st] defendant from the schedule property. In the saidproceedings, the learned Rent Controller appointed Sri K. Ramgopal, Advocate, asCommissioner to conduct inventory of the articles found in the premises and delivervacant possession of the schedule of property in R.C.C. No.178/1981 on the file of IIAdditional Rent Controller, Hyderabad. The Advocate Commissioner filed his reportmarked as Ex.B-12, dated 11.12.1982. Ex.B-13 is the Commissioner proceedings inE.A. No.100 of 1982 in E.P.No.30 of 1982 in R.C.C. No.178 of 1981. Ex.B-14 is thecertified copy of the inventory of articles taken after removing the seals and lock of thepremises by the Advocate Commissioner. Ex.B-14 is the important document fordeciding the real controversy. As per the Commissioner's report, he found only 95items of property inside the premises which were kept under the lock and key of theplaintiff-bank but some of the items seized by the plaintiff-bank were found missing.The suit was filed on 30.10.1976 and the plaintiff-bank admittedly seized the articlesmentioned in Ex.A-17, inventory report, kept under the lock and key of the plaintiff-bank. The 1[st] defendant denied about the alleged seizure and pointed out missing ofcertain items of the property seized under Ex.A-17 as per the Commissioner's reportmarked as Ex.B-14. DW.1 testified about filing of Rent Control Case in R.C.C. No.178of 1981 on the file of II Additional Rent Controller, Hyderabad and initiation ofexecution proceedings conducting inventory by the Commissioner for delivery ofvacant possession of the property. The Commissioner delivered vacant possession ofthe property and as such handed over the articles and machinery found in thepremises to the plaintiff-bank, after conducting inventory vide Exs.B-13 and B-14,

Inventory Report dated 26.12.1982. On the said report, the 1[st] defendant, BranchManager, and Field Officer of the plaintiff-bank and the Advocate commissioner werealso signed. Thus, it is evident from Ex.B-14 that inventory was conducted in thepresence of the plaintiff-bank represented by its Manager and its officials. All thearticles were handed over to the Manager of the plaintiff-bank under the original ofEx.B-15; since then, the articles were in possession of the plaintiff-bank. Whencompared to the inventory report prepared by the Commissioner marked as Ex.B-14with the Inventory report prepared by the plaintiff-bank, marked as Ex.A-17, Item Nos.5,6, 8 and 19 found in Ex.A-17 were not available at the time when the commissionerconducted inventory and prepared his report. According to the defendants, the value ofthose items i.e., item Nos.5, 6, 8 and 19 noted in Ex.A-17 is worth Rs.40,000/- toRs.50,000/-. The description of the items allegedly found missing is:

Item No.5 : 6.2. 16 V filaments,

Item No.6 : 250 V and 25 Watt filaments, Item No.8 : 6 & 12 V and 3 Watt filaments, Item No.19 : Neon Gas.

26. The quantity of those items was not mentioned anywhere in the list under Ex.A-17, however, it is clear that those items were not available at the time when theinventory was conducted under Ex.B-14.

27. According to the judicial admissions made by the plaintiff-bank in the plaint andthe evidentiary admissions in the evidence of PW.1, the premises was under the lockand key of the plaintiff-bank and all the items lying inside the premises were deemedto be in the custody of the plaintiff-bank. When PW.1 was cross-examined about theitems found missing when an inventory was conducted by the AdvocateCommissioner in R.C.C. No.178 of 1981 under Ex.B-14, PW.1 at page No.7 of hiscross- examination admitted that the articles and machinery seized by the plaintiff-bank are not traceable. In spite of notice issued to the plaintiff-bank by the defendants,items found missing i.e., item Nos.5, 6, 8 and 19 were not produced. Ex.B-17 is thenotice got issued by learned counsel for the defendants calling upon the plaintiff-bankto produce the items seized by the plaintiff-bank on 30.09.1975 and the items ofmovable handed over by the Advocate Commissioner in E.P. No.30 of 1982 in R.C.C.No.178 of 1981. Non-production of those items, despite notice, clearly indicates thatitem Nos.5, 6, 8 and 19 were not available, irrespective of the value of those items.

28. The main contention of learned counsel for the defendants-respondents beforethe trial Court and this Court is that when the goods hypothecated were seized by theplaintiff-bank, it is the duty of the plaintiff-bank to return those items, as and when thedefendants tendered the amount or paid the loan dues. When the plaintiff-bank failed to produce those items, the defendants called upon the plaintiff-bank to produce thegoods to redeem the property pledged, the plaintiff-bank is not entitled to a decree forrecovery of the said amount placed reliance on judgments reported in SriNarasimhaswami, Namagiri Amman and Sri Ranganathaswami Temples Vs.Muthukrishna Iyengar[[1]],Lallan Prasad Vs. Rahmat Ali and another[[2]],CentralBank of India Vs.Grains and Gunny Agencies and others[[3]]and The Dhanalakshmi BankLimited Vs.K.K. Jose alias Jose Mohan and others[[4]]. Relying on the abovejudgments, the trial Court dismissed the Suit.

29. The learned counsel for the plaintiff-bank, though contended that the finding ofthe trial Court based on the judgments referred supra is not in accordance with law, didnot explain as to how the judgment under challenge is perverse or illegal. However, Iwould like to advert to the principles laid down in the above judgments to decidewhether the trial Court appreciated the law in proper perspective or not.

30. In Lallan Prasad[2] the Apex Court had an occasion to decide the similar issueand while referring Sections 172, 173, 175 and 176 of the Indian Contract Act, 1872ruled as follows:

“Under Section 176 of Indian Contract Act, once pawnee sells goods the right ofthe pawner to redeem them is extinguished. But the pawnee is bound to applythe sale proceeds towards satisfaction of the debt and pay the surplus, if any,to the pawner. Right of pawnee to sue on debt prevails only if he is in position toredeliver goods on payment of debt and not otherwise. If pawnee is not in aposition to redeliver goods, he cannot have both payment of debt and alsogoods.”

31. I n Dhanalakshmi Bank[4], the High Court of Kerala reiterated the same principles and ruled as follows:

“The two ingredients of a pawn are:

(i) The property pledged should be actually or constructively delivered to thepawnee, and

(ii) the pawnee has only a special property in the pledge, the general propertyremaining with the pawnor and the same will revert to him on discharge of thedebt.

In case of default by a pawnor to repay the amount borrowed, thepawnee has three rights under Section 176 of the Indian Contract Act. Theyare:

(1) He may bring a suit upon the debt,

(2) He may retain the pawn as a collateral security, and

(3) He may sell the goods after giving the pawnor reasonable notice of sale.

The pawnee is not entitled to sue on the debt and realise the amount due unlesshe is in a position to redeliver the goods on payment of the debt by the pawnor.In case the pawnee is not in a position to return the goods to the pawnor on thepawnor tendering the amount due the pawnee is not entitled to get a decree.”

32. In Sri Narasimhaswami[1] the High Court of Madras while discussing Section148 of Indian Contract Act, held as follows:

“Once the contract of bailment is proved and there is the entrustment of thegoods with the bailed the loss of the subject matter of the bailment is itselfprima facie evidence of the negligence of the bailee. In order to escape liabilityfor the loss occurred the onus to proof will be upon the bailee to show that hehad taken the necessary standard of care as imposed upon him by the statute.”

33. The principle laid down by the Madras High Court has no direct application tothe present facts of the case except to the extent of exercising due diligence by theplaintiff-bank. It has no relevance the present facts of the case.

34. In Central Bank of India[3] the Madhya Pradesh High Court while decidingsimilar case held as follows:

“Bank shall take care of goods when claimed charges for protection,maintenance and supervision of pledged goods.”

35. In the facts of the above judgment, the goods were seized, but during custody ofthe plaintiff-bank, they were deteriorated and become valueless. Therefore, the trialCourt held that the plaintiff-bank failed to take care of the goods and was not in aposition to return them to the defendants. Thereby, the plaintiff-bank is not entitled toclaim the amount under documentary bills since it failed to mitigate the loss. Theprinciple laid down by the Madras High Court is also not much relevance.

36. In the instant case, the relationship between the plaintiff-bank and defendants 1and 2 is pawnee and pawnor. The actual possession of the goods and machinerywas with the defendants though the plaintiff-bank is deemed to have been inconstructive possession. Admittedly, the plaintiff-bank took possession of severalitems of movables hypothecated to the plaintiff-bank vide Ex.A-17, but at the timewhen Commissioner was appointed by the learned Additional Rent Controller,Hyderabad to deliver vacant possession of the property in R.C.C. No.178 of 1981 aninventory was taken in the presence of Manager and Field Officer of the plaintiff-bankand 1[st] defendant in the suit, but item Nos.5, 6, 8 and 19 were found missing which Imentioned in the earlier paragraphs and the plaintiff-bank allegedly sold some of theitems but what were the items sold by the plaintiff-bank in the auction through a privateauctioneer was not known and not even explained in the entire evidence of PW.1; nodocumentary evidence is brought on record to substantiate the same. Thus, theplaintiff-bank was disabled to produce the item Nos.5, 6, 8 and 19 as they were not traceable as per the admission made by PW.1 in his evidence. When the plaintiff-bank was not in a position to produce the goods seized, it is not entitled to recover theamount by filing a suit, in view of Section 176 of Indian Contract Act and by applyingthe principles laid down by the Apex Court and High Court of Kerala in LallanPrasad[2] and Dhanalakshmi Bank[4] respectively.

37. The trial Court basing on the principles laid down in the above two decisionsconcluded that the plaintiff-bank did not exercise due diligence in presenting thearticles seized as per Ex.A-17 and failure to exercise reasonable care that is expectedfrom a prudent man to safeguard the goods seized by the plaintiff-bank and allowedthe property to be lost or damaged. Thus, the plaintiff-bank disowned its liability toreturn part of the items seized under the original of Ex.A-17. Even if the defendantsintend to redeem and tender the amount, the plaintiff-bank is not in a position to returnthose items i.e., item Nos.5, 6, 8 and 19 irrespective of its value. In such case, theplaintiff-bank is disentitled to claim a decree for realization of money either byproceeding against the property mortgaged or personally against the defendants.

38. In view of the settled law laid down by the Apex Court, the plaintiff-bank is notentitled to the preliminary decree for recovery of the amount against the scheduleproperty. However, the learned counsel for the plaintiff-bank contended that theprinciples laid down in the two judgments referred supra is applicable only when thesuit is filed simply for recovery of money not for a preliminary decree for sale of theproperty for realization of the debt due, in terms of equitable mortgage created by the2[nd] defendant. This contention does not stand to any legal scrutiny for the reason thateven if preliminary decree for redemption is passed, the defendants can redeem themortgage within the time fixed by the Court or before confirmation of sale by the Courtin the execution proceedings after obtaining Final Decree. In such case, the duty ofthe plaintiff-bank is to return the goods hypothecated to the plaintiff-bank but in view ofthe facts and circumstances in the present case, Item Nos.5, 6, 8 and 19 were nottraceable according to evidentiary admission of PW.1. Thereby, the plaintiff-bank is notin a position to return those goods even when the defendants tendered the amount dueto the plaintiff-bank. Therefore, in view of the principle laid down by the Apex Courtand Kerala High Court in the judgments referred supra, the plaintiff-bank is notentitled even for a preliminary decree for realization of the debt due by proceedingagainst the schedule of property. Hence, I find no illegality in the decree and judgmentpassed by the trial Court warranting interference of this Court. Accordingly, the point isheld in favour of the defendants-respondents and against the plaintiff-bank. In view ofmy findings on point Nos.1 and 2, I find that the Appeal is devoid of merits anddeserves to be dismissed.

In the result, the Appeal Suit is dismissed confirming the decree and judgmentdated 20.12.1996, passed in Original Suit No.750 of 1976 by the Second AdditionalJudge, City Civil Court, Hyderabad.

In consequence, miscellaneous petitions, if any, pending in this Appeal, shallstand dismissed. No order as to costs.

____________________________

M. SATYANARAYANA MURTHY, J

Date: 30-12-2014.Dsh

HON'BLE SRI JUSTICE M. SATYANARAYANA MURTHY

198

DSH20012015

CITY CIVIL COURT APPEAL No. 53 OF 1997

Date. 30-12-2014

[1]AIR 1962 Madras 244

[2]AIR 1967 SC 1322

[3]AIR 1989 MP 28

[4]AIR 1991 Kerala 388