HDFC Bank Limited vs M/s Uni Leather Exports on 29 December 2023

FINAL ORDER

1. The above Original Application is filed under Section 19 of the Recovery of Debt and Bankruptcy Act seeking recovery of Rs.54,82,513/- with further interest from the date of filing of the OA and also by allowing the same to be recovered from defendant jointly and severally.

2. The above original application is filed before the DRT-I and stood transferred to this Tribunal and renumbered as above.

3. Wrapped in brevity the case of the applicant can be abbreviated as follows:- The 1st defendant had approached erstwhile Centurion Bank of Punjab Ltd and availed a Cash Credit facility for Rs.3 crores and said facility was disbursed as fund based Cash Credit of Rs.2 crores and non fund based letter of credit of Rs.1 crores. It is further stated that the 1st defendant vide the letter dated 26.3.2009 approached the bank for closure of the Cash Credit facility through the 2nd defendant and informed that the 2nd defendant will pay the outstanding loan amount through RTGS were by the credit facility will be taken over 2nd defendant by issuing a Counter Guarantee and requested for release of security upon such payment by the 2nd defendant. It is further stated that the 2nd defendant by virtue of the letter dated 26.3.2009 had expressed to take over the loan outstanding and agreed to clear a sum of

Rs.2,03,11,000/- vide RTGS and also executed a Counter Guarantee cum indemnity for an amount of Rs.99,32,000/- with respect of the credit facilities availed by 1st defendant. The 2nd defendant had also remitted an amount of Rs.34,41,182/- towards the letter of credit on 2.6.2009 and it was orally agreed that the 1st defendant would remit Rs.65,14,341/- as on 9.6.2009 and further requested the lender bank not to place any demand with the 2nd defendant by invoking the counter guarantee dated 30.3.2009. A further remittances of Rs.30,00,000/- and Rs.2,00,000/- were also remitted by the 1st defendant on 26.8.2009 and 24.12.2009. It is the further case of the applicant that the 1st defendant failed to adhere to the payment and further failed to honour the same, despite repeated reminders by the bank officials.

4. It is further stated that on failure of the 1st defendant to honour the commitment, the applicant approached the 2nd defendant seeking invokement of Counter Guarantee Cum Indemnity dated 30.3.2009 for the total outstanding and 2nd defendant refused the same. Even though the 1st defendant was apprised of about the declining of request for invocation of Counter Guarantee, the 1st defendant also failed to make any remittances. The applicant had on 4.6.2012 issued a demand notice to the 1st defendant with a copy to the 2nd defendant calling upon them to pay the due amount of Rs.54,82,513/- as on 4.6.2012 along with interest. According to the applicant, the defendants failed in paying back the amount resulted the applicant being compelled to file this OA seeking issuance of a Recovery Certificate for the outstanding amount.

5. The 1st defendant had filed a written statement denying the averments as made in the OA. It is contended that the applicant utterly failed to invoke the guarantee claim from the 2nd defendant on time and in order to cover the said failure is putting forward the false claim. It is also the case of the 1st defendant that he had kept an amount of Rs.34 lakhs in its account with applicant bank and without informing the defendants the applicant debited the current account by Rs.65,14,340.11p being the LC payment resulting an overdrawing of Rs.65,14,341.08. The 1st defendant contends that had the counter guarantee been invoked, the entire amount would have been received by the applicant from the 2nd defendant bank and due to the failure of the applicant, the 1st defendant is put to loss. The 1st defendant also contends that the debit of LC payment was not conveyed to the 1st defendant by the applicant bank which according to the 1st defendant is against normal banking practice. Hence according to the 1st defendant the failure of the applicant in invoking the guarantee of the 2nd defendant had caused all these doll drums. The 1st defendants further denies any due and also seeks leave to raise a Counter Claim, which was later filed and got numbered as Counter Claim 2 of 2017.

6. The 2nd defendant had filed their reply statement denying the liability and contending that the 2nd defendant is not a necessary party in the OA. It is also stated that the OA is filed without any bonafides and the claim is hopelessly barred by limitation. The 2nd defendant though admits the execution of Counter Guarantee Cum Indemnity contends that the applicant failed in invoking the same on time. It is also pointed out that the liability of the 2nd defendant under the counter guarantee was valid only up to 9.7.2009 and within that time no claim was put forward by the applicant. Hence the 2nd defendant prays for dismissal of OA as against them with cost.

7. The 1st defendant had filed a Counter Claim No.2 of 2017 seeking a prayer to direct the applicant bank to pay the counter claimant/ 1st defendant a sum of Rs.34,00,000/- with interest at rate of 24% with monthly rest from the rate of OA till date of realization.

8. The contention of the counter claimant/1st defendant is as follows:- The guaranteed payment should have been claimed by the applicant from the 2nd defendant as per the counter guarantee given by the 2nd defendant. It is also stated that there is a illegal debit of Rs.34,00,000/- by the applicant. It is also contended that the applicant should have invoked the guarantee of the 2nd defendant and should not have debited any amount from the current account without intimating the counter claimant and also by keeping the counter claimant at dark. Since the amount of Rs.34 lakhs kept in the account of the counter claimant was appropriated, the counter claim is made seeking recovery of the said amount.

9. A rejoinder is filed by the applicant bank as a written statement inter alia reiterating the contentions already taken in the OA. It is also stated that the counter guarantee cum indemnity was invoked well within time. The remittance of Rs.30,00,000/- and Rs.2,00,000/- is admitted. It is reiterated that an outstanding amount of Rs.54,82,513/- is outstanding in the loan account which they are entitled to be recovered as claimed in the TA.

10. It appears from the proceedings that IA.326 of 2017 is filed by the 1st defendant/counter claimant seeking to give up the 1st defendant from the party array and discharging him. In view of the taking over of the facility 1st defendant was having with the applicant by the 2nd defendant and issuance of counter guarantee. The learned presiding officer of DRT-I, before whom the matter was pending vide the proceedings dated 29.8.2022 observed that the contention taken in said IA could be considered at the final arguments.

11. From the side of the applicant AW1 was examined and the following documents were marked as Ext.A1 to Ext.A15: -

(i) Power of attorney dated 26.5.2017.

(ii) Sanction letter dated 18.1.2008.

(iii) Master credit facility agreement dated 29.1.2008.

(iv) Declaration dated 29.1.2008 executed by First defendant.

(v) Deed of guarantee dated 29.1.2008 executed by first defendant.

(vi) Counter Guarantee Cum Indemnity dated 30.3.2009 executed by Second Defendant.

(vii) Second Defendant Bank to applicant bank letter dated 30.3.2009.

(viii) First defendant applicant bank letter dated 4.5.2009.

(ix) Second defendant’s acknowledgment letter dated 6.5.2009.

(x) Demand notice dated 4.6.2012.

(xi) Acknowledgment card for the service of legal notice dated 4.6.2012 to the first defendant.

(xii) Acknowledgment card for the service of legal notice dated 4.6.2012 to the first defendant .

(xiii) Statement of accounts.

(xiv) Copy of the CSR no.480 of 2016.

(xv) Paper publication.

12. 1st defendant had filed a counter proof affidavit reiterating the contentions as taken in the reply statement. The contention that the amount of Rs.65,14,340.11 was debited from the current account on 9.6.2009 which was duly payable by the 2nd defendant on 3.6.2009 resulting the over drawing on the account which occurred only as the Counter Guarantee was not invoked on time. It is further reiterated that due to the default and failure on the part of the applicant bank in invoking the Counter Guarantee on time, the amount could not be recovered, for which the 1st defendant cannot be fastened with the liability.

13. A counter proof affidavit is filed by the 2nd defendant through its AGM, Mr. Muthukumaran. It is contented that the 2nd defendant is not a necessary party and the claim against the defendant is barred by limitation. It is reiterated that the 2nd defendant had taken over the funded liability of the 1st defendant and cleared the said loan on 26.3.2009 by payment of Rs.2,03,11,000/- and executing a Counter Guarantee Cum Indemnity for a sum of Rs.99,32,000/- which was valid only up to 9.7.2009. It is also stated that the counter guarantee was not invoked by the applicant with in stipulated time. The 2nd defendant denies existence of any liability towards the applicant. It is also stated that the loan account was later taken over by Federal Bank Ltd. From the side of the 2nd defendant Ext.B1 to B11 were marked viz.,

(i) Letter from 1st defendant informing dues with applicant,

(ii) Letter of applicant to this defendant to inform dues,

(iii) Letter of D2 to applicant to request release of securities,

(iv) Letter of D2 to applicant to request release of securities,

(v) Letter of D2 regarding release of securities,

(vi) Letter of D1 to applicant regarding release of securities,

(vii) Letter of D2 to Federal Bank on takeover by them,

(viii) Letter of Federal Bank to D2 asking for the details,

(ix) Copy of counter guarantee of Federal Bank to D2,

(x) Copy of Power of Attorney of Deponent of D2.

14. The counter claimant is examined as CW1, in pursuant to the proof affidavit and the statement of accounts produced from their side is marked as Ext.C1 on 11.6.2018.

15. The 1st defendant had also filed IA.326 of 2017 seeking for an order discharging its liability as according to them the entire liability stand shifted to 2nd defendant, as the 2nd defendant had admittedly issued a letter of guarantee cum indemnity. The Ld. Presiding officer, DRT-I had vide the proceedings dated 29.8.2022 recorded that the contention would be considered at the time of final arguments in the OA.

16. In view of the above pleadings and evidence adduced in support of respective claims and defense the respective counsels were heard. TA.107 of 2022

17. The following issues arises for consideration in this TA: -

(i) Whether the applicant had succeeded in proving the OA claim?

(ii) Whether the 1st defendant is liable to be discharged as the 2nd defendant had executed a letter of Guarantee Cum Indemnity. Whether the 2nd defendant is liable for the debt due from 1st defendant or whether they are an unnecessary party?

(iii) Whether the claim of the applicant is barred by limitation? Issue No. (i)

Whether the applicant had succeeded in proving the OA claim?

18. The applicant had in support of their claim produced the Master credit facility agreement, declaration and Deed of Guarantee all dated 29.1.2008. The copy of the sanction tickets is also produced by the applicant. Even though the applicant had not produced any of the originals of the above documents at the first instance and the 2nd defendant had taken a specific contention that no original documents are forth coming along with the OA which evidences the lack of bonafides on the Applicant this Tribunal is not inclined to reject the said evidence as the borrower namely the 1st defendant is not disputing any of the documents produced from the side of the applicant. More over the scheme of the statute does not envisage production of the original documents and only the production of true copy of the documents relied by them are mandated to be produced. It is also to be noted that the original documents were later produced. Merely for the reason of non production of the originals along with the OA, when the executor/ the borrower is not disputing the execution, the evidence cannot be discarded.

19. Now the issue arise is whether the failure of the applicant to invoke the Letter of Guarantee will exonerate the defendant from the liability. it is true that the 2nd defendant had executed a letter of Guarantee cum indemnity in favour of the applicant, the same will not ipso facto exonerate the liability of the 1st defendant as the same is only an agreement to indemnify and guaranteeing the payment. The same will not take away the right of the applicant to proceed against defaulted borrower. In view of the above the documents produced by the applicant along with the proof affidavit are found to be admissible.

20. As mentioned above the documents clearly evidences the liability of the defendants. The contra evidence adduced by the 1st defendant is only the self serving deposition of defendant in the counter proof affidavit. In view of the above this Tribunal is of the view that, issue no.i is to be decided in favour of the applicant. Issue No. (ii) & (iii) Whether the 1st defendant is liable to be discharged as the 2nd defendant had executed a letter of Guarantee Cum Indemnity? Whether the 2nd defendant is liable for the debt due from 1st defendant or whether they are an unnecessary party?

21. The 2nd defendant though admitting the contentions of the applicant as far as the takeover of the loan and execution of Counter Guarantee Cum Indemnity is putting forward a specific contention that the guarantee was valid only up to 9th July,2009. This contention is taken on the basis of a specific clause in the counter guarantee agreement “(m) Not-with standing anything contained herein above this guarantee is valid upto 9th July 2009 or any claim on demand under this guarantee is to be made on or before 9th July 2009.”

22. The 2nd defendant had also adduced evidence by filing a counter proof affidavit. In the absence of any claim evidencing that the applicant had demanded any payment from the 2nd defendant well within the aboveperiod when the counter guarantee was valid, the 2nd defendant cannot be fastened with any liability.

23. Even though the 2nd defendant had taken a contention that their inclusion in the OA is a misjoinder of party, this Tribunal is of the considered opinion that in view of the admitted fact about the execution of counter guarantee cum indemnity and failure of the applicant to get the amount recovered, the OA can only be maintained by inclusion of 2nd defendant in the party array. Hence this issue is answered accordingly. Issue No. (iii) Whether the claim of the applicant is barred by limitation?

24. The 2nd defendant had taken the contention that the claim of the applicant is time barred. It is to be noted that the credit facility was sanctioned on 18.1.2008 and the execution of Master Credit Facility Agreement is on 29.1.2008. The further development as to the execution of counter guarantee cum indemnity is on 30.3.2009. In View of the fact that the claim as against counter guarantee is not found to be enforceable, the date of execution of counter guarantee will not constitute a cause of action. From the statement of accounts produced by the applicant, it is stated that the last remittance in the loan account is on 26.12.2009 and the demand notice is issued on 4.6.2012.

25. From the sanction tickets which are produced as A2, the only mode of repayment as envisaged is “on demand” no other mode of repayment is prescribed in the sanction. It is well settled by binding judicial decisions that in order to apply Article 22 of the Limitation Act, “the amount due” is not when the demand is made and when the amount has been disbursed. From the above it appears that the contention regarding the limitation is to be held in favour of defendant.

26. However on consideration of the documents relied upon by the applicant, it is evident that the disbursal of the facility is against security created by way of mortgage. Even though no evidence as to the existence of any mortgage is produced in the OA, it is clear from the sanction ticket that the facility is secured by a mortgage as serial no.21 of the sanction ticket evidences that the amount is disbursed pursuant to execution of equitable mortgage over the properties scheduled therein. This fact is not disputed by the defendants. Hence the debt is secured by a mortgage the limitation for the same is 12 years and hence this TA is found to be filed well within limitation.

27. On consideration of the findings as entered in respect of issue Nos. (i) to (iii), this Tribunal is of the view that the TA is liable to be allowed as against first defendant. The claim against 2nd defendant is dismissed. Since there is admitted lethargy from the part of Applicant in invoking the Counter Guarantee, which in turn would have helped the 1st defendant to take over the liability, a lenient view is taken as to pendent lite and future interest and the same is awarded at 8% (simple) per annum.

28. In the result: -

(a) TA No.107 of 2022 stands allowed.

(b) The applicant is entitled to recover an amount of Rs.54,82,513 with further interest at the rate of 8% simple from the 1st defendant and their assets.

(c) A Recovery Certificate is to be drawn and issued to the Recovery Officer to enable recovery of the as per the above terms.

(d) Applicant is allowed to realize cost of the proceedings for which cost memo is to be filed in 7 days’ time from the date of receipt of the copy of the order. Counter Claim No.2 of 2017

29. The counter claim is filed by the 1st defendant contending inter alia that the applicant failed in invoking the Letter of Guarantee Cum Indemnity issued by the 2nd defendant and had illegally debited an amount of Rs.34,00,000/-. It is also stated that the following amounts are debited from the current account on various dates Rs.34,39,570.99, Rs.16,05,134.01, Rs.14,54,00.91and Rs.34,55,205.19 on 29.5.2009, 3.6.2009, 9.6.2009 and on 99.6.2009 respectively. It is also contended that without verifying the balance in the current account, a further remittance of Rs.30,00,000/- and Rs.2,00,000/- each were remitted on 26.8.2009, 29.9.2009 and 24.12.2009. It is also stated that on November 2012 the counter claimant visited the applicant and informed as to the intention to file a suit. In the counter claimant is seeking a Recovery of and amount of Rs.34,00,000/- from the applicant. The applicant had filed their rejoinder denying the contentions of the counter claimant.

30. The only issue arise for consideration in the counter claim is that whether the counter claimant entitled to recover the amount of Rs.35 Lakhs from the applicant bank.

31. In support of the counter claimant the counter claimant had produced the statement of accounts and got the same marked as CW1. Apart from production of statement of accounts which is accordingly marked as C1, no other documentary evidence is forth come from the part of the counter claimant in support of the counter claim.

32. The applicant had produced the loan and other documents relied upon by them in the TA. The applicant had reiterated the contentions they have taken in the TA and denied the averments in the counter claim.

33. The fact that the applicant failed to invoke the letter of credit issued by the 2nd defendant, the same will not itself absolve the liability of the 1st defendant towards the applicant bank. Apart from production of the statement of accounts no evidence in respect of the disentitlement of the applicant in debiting the amount from the current account as alleged in produced by the counter claimant. The self serving evidence of the counter claimant, not supported by cogent and sufficient evidence does not prove the claim put forth in the counter claim. In view of the above this Tribunal is of the considered opinion that there is no evidence or supporting documents in respect of the counter claim as raised by the 1st defendant and the same is liable to be dismissed.

34. In the result, the counter claim is liable to be rejected and accordingly the counter claim is dismissed.

35. Communicate a copy of the order to the parties concerned in terms of Section 19(21)(i) of the RDB Act, read with Rule 16 of DRT (Procedure) Rules, 1993. (Dictated to PS, transcribed by him, corrected, signed and pronounced by me in Open Court, on this the 29th day of December, 2023) Sd/- (T. RAJESH) PRESIDING OFFICER DRT-II, CHENNAI