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Medichem Industries Vs. Bank of Baroda - Court Judgment

LegalCrystal Citation
CourtDRAT Madras
Decided On
Judge
Reported inII(2003)BC29
AppellantMedichem Industries
RespondentBank of Baroda
Excerpt:
.....till august, 1995 and since the appellants have been making payments till august, 1995 the suit filed on 4.9.1995 is not barred by limitation. he further submitted that even assuming the last date for filing was 1.9.1995, that has to be excluded, as 1.9.1995 fell on friday and 2.9.1995 and 3.9.1.995 being chartered holidays and 4.9.1995 being the next working day, it was filed in time. as the appellants have been making payment till august, 1995 the suit filed on 4.9.1995 is not barred by limitation. viewed at any angle, it can be safely concluded that the suit is not barred by limitation and the argument advanced by the counsel for the appellant in this aspect does not hold good.5. counsel for the appellant vehemently argued that after seizure the property was not sold and the.....
Judgment:
1. The respondent applicant Bank filed application against the appellant defendants for recovery of Rs. 14,87,962.14 p. with costs, current and future interest. The defendants appellant filed the written statement resisting the claim of the appellant. The matter was heard by the Presiding Officer, DRT, Bangalore, and he allowed the application and ordered for issue of Recovery Certificate as prayed for in the application. Aggrieved against that order the appellant has preferred this appeal. The main objection raised by the appellant is that the Bank has seized the goods and machineries of the appellant and is keeping it under its custody without selling it and without adjusting the sale proceeds of the seized goods the present suit is not maintainable. Counsel for the appellant submits that the plaintiff Bank cannot recover the amount by keeping the pledged goods in its custody without selling it and appropriating it towards the suit claim. He further submitted that the suit is also barred by limitation.

3. With regard to the point regarding limitation, Counsel for the appellant submitted that the amount was borrowed in the year 1992 i.e.

on 2.9.1992 and the suit ought to have been filed on 1.9.1995, but the suit was filed on 4.9.1995 and it is barred by limitation.

4. Counsel for the respondent Bank submitted that the appellants have made payments till August, 1995 and since the appellants have been making payments till August, 1995 the suit filed on 4.9.1995 is not barred by limitation. He further submitted that even assuming the last date for filing was 1.9.1995, that has to be excluded, as 1.9.1995 fell on Friday and 2.9.1995 and 3.9.1.995 being chartered holidays and 4.9.1995 being the next working day, it was filed in time. As the appellants have been making payment till August, 1995 the suit filed on 4.9.1995 is not barred by limitation. Viewed at any angle, it can be safely concluded that the suit is not barred by limitation and the argument advanced by the Counsel for the appellant in this aspect does not hold good.

5. Counsel for the appellant vehemently argued that after seizure the property was not sold and the appellant was keeping the goods till date and without adjusting the sale proceeds of the seized goods the suit itself is not maintainable. The Bank seized the unit on 2.9.1995.

Counsel for the appellant submits that even with regard to seizure no intimation was given and the appellant wrote many letters to the Bank with regard to the seized articles and also issued a lawyer's notice and the Bank did not send any reply at all and the seized articles are worth Rs. 7,78,000/- and without appropriating that amount towards the suit claim the suit filed is not at all maintainable. He further drew my attention to the prayer column in the plaint and submitted that the plaint prayer does not disclose the amount to be decreed but the Presiding Officer, DRT, has passed order allowing the OA and directed for issue of Recovery Certificate as prayed for in the application. The plaint prayer does not speak with regard to the amount to be decreed.

6. Admittedly, the unit was seized with its machineries and raw materials and goods on 2.9.1995. Till now the machineries and goods are not sold. About seven years have elapsed and the respondent Bank is still keeping the raw materials and machineries without selling it. As rightly pointed out by the Counsel for the appellant, the Bank was duty bound to sell the seized articles and adjust that amount towards the suit claim. The Bank has miserably failed to do so. Counsel for the appellant, submits that the value of the seized goods is Rs. 7,78,000/-. Counsel for the respondent Bank has filed the Valuation Report which shows that the total market value of the machineries and other materials are tentatively assessed at Rs. 2,07,000/-. The unit was seized on 2.9.1995. The seized goods and machineries were valued on 22.8.1996. Only after nearly about a year the seized goods were valued.

It is pertinent to note that the seized goods include chemicals like liquid powder, etc. as raw materials and when the unit was seized, some of the materials were also in process and the stocks were consisting of raw materials and some of the materials in process, some finished product without packing and packed finished product. Further, it is evident from the Valuation Report filed by the Bank that on close observation it was found that all these raw materials were completely spoiled and damaged due to climatic variations and also due to chemical storage and the paint are chemicals which are in liquid form and completely dried and the paint raw material which are in powder form are solidified due to moisture and other reasons. The material in process in the machinery are also dried and was damaging the machinery also. The machinery was also further damaged due to chemical reaction of the raw materials in process for a long time and with the introduction of the latest machinery with improved technology the machineries lying in the unit are almost out-dated and it is not of much use. As the unit is also closed for a very long time, the resale value of the same is further reduced.

7. Considering all these observations and also the relevant factors like make, model, size, capacity, age, depreciation, present conditions, future life, etc., the Valuer of the side of the Bank has offered a tentative valuation of the seized items at Rs. 2,07,000/-.

Till now the Bank is keeping the seized goods. It is almost nearing completion of seven years after the seizure. So the goods ought to have been deteriorated much more by this time also.

8. Counsel for the appellant filed statement of account for 31.3.1996 sent along with Income-tax Returns which reveals the current asset as Rs. 7,72,822/-. He has also set out clearly with regard to this amount in the letter written by him to the Bank. It appears from the records that the appellant also wrote many letters to the Bank and lawyers to which the Bank did not care to send any reply. After seizing the goods, the respondent Bank was keeping all the articles for such a iong period of seven years which has caused much prejudice to the borrower and also loss to the borrower. If the articles were sold immediately after seizure the sale of the machineries would have brought larger amount and if that amount was appropriated towards the suit claim much of the burden of the borrower would have been reduced. The Bank did not sell the seized goods immediately after seizure and was keeping it for such a long period of seven years till now without selling it. If the Bank had sold the goods within a reasonable time after seizure, it would have been sold for a higher price and considerable reduction would have been made in the suit claim. The Bank has miserably failed in not selling the seized goods in time. By keeping the seized goods for such a long period, the Bank is not entitled to contend that the Bank is entitled for the suit claim. Even in the plaint, the plaintiff Bank has not set out for how much amount the suit has to be decreed.

9. Counsel for the appellant cited the decision in [1997] 2 SCR Page 233, Lallan Prasad v. Rahmat Ali, wherein the Apex Court has held that pledgee cannot maintain a suit for recovery of debt as well as retain the pledged property. Relying upon this decision, Counsel for the appellant submitted that the Bank has seized the goods and had retained those goods as well as filed the suit and the Bank cannot retain the seized goods and file the suit for recovery of the entire amount.

Section 176 of the Indian Contract Act, 1872, deals with the rights of a pawnee and provides that in case of default by the pawner the pawnee has, (1) the right to sue upon the debt and to retain the goods as collateral security, and (2) the right to sell the goods after reasonable notice of the intended sale to the pawner. So long, however, as the sale does not take place, the pawner is entitled to redeem the goods on payment of the debt. Therefore, the right to sue on the debt assumes that he is in a position to redeliver the goods on payment of the debt, and if by denying the pledge or otherwise, he has put himself in a position whereby he is not able to redeliver the goods, he cannot obtain a decree. The Apex Court has also observed in the same judgment that once the pawnee by virtue of his right under Section 176 sells the goods, the right of the pawner to redeem them is of course extinguished. But as aforesaid, the pawnee is bound to apply the sale proceeds towards satisfaction of the debt and pay the surplus, if any, to the pawner. So long, however, as the sale does not take place the pawner is entitled to redeem the goods on payment of the debt. It follows therefore that where a pawnee files a suit for recovery of debt, though he is entitled to retain the goods he is bound to return them on payment of the debt and the pawner therefore can sue on the debt retaining the pledged goods as collateral security. If the debt is ordered to be paid he has to return the goods or if the goods are sold with or without the assistance of the Court appropriate the sale proceeds towards the debt.

10. The respondent Bank seized the goods in the year 1995 and is retaining the goods till 2002 without selling it. As I have already indicated, the applicant Bank ought to have sold the goods immediately after the seizure or within a reasonable time. Without doing it the applicant Bank has retained the seized goods causing hardship to the appellant. As observed from the Valuation Report filed by the Bank, some of the goods are perishables and they have been damaged due to lapse of time and the machineries have also been damaged. For the lapse on the side of the respondent Bank in not selling the seized goods in time much loss and hardship has been caused to the appellant. The value of the goods as on the date of seizure has to be taken into account and the value of the goods as on the date of seizure has to be appropriated towards the suit claim. The statement of account and the income-tax return reveal that the value of the machineries on the date of seizure was Rs. 7,78,000/-. In the absence of the any document filed by the Bank to prove the value of the goods on the date of seizure, the statement of account and the income-tax return filed by the appellant has to be believed and they have to be taken into consideration for assessing the value of the seized goods. Even the Valuation Report filed by the Bank reveals that much of the goods have been damaged and even in the year 1996 they cannot be sold for its real value. So the valuation given by the appellant and the documents filed by the appellant have to be taken into consideration and that amount has to be deducted from the claim of the appellant in the suit. The appellant has claimed a sum of Rs. 14,87,962.14 p. in para 5.10 in the plaint. Even before the plaint was filed the goods were seized. So the value of the seized goods i.e, Rs. 7,78,000/-have to be deducted from the suit claim. After deducting this amount the respondent Bank is entitled for a decree of Rs. 7,09,962.14 p. The respondent Bank cannot have a decree for the full amount as well as keep the seized articles. So, after deducting the value of the seized articles the respondent Bank is entitled for a decree of Rs. 7,09,962.14 p.

11. Accordingly, I hold that the respondent Bank is entitled for a decree of Rs. 7,09,962.14 p. with costs and interest on that amount at 6% p.a. from the date of suit till the date of realization. The order of the Presiding Officer, DRT, is modified to the extent indicated above and the Recovery Certificate is ordered to be issued by the Presiding Officer, DRT, Bangalore, as per the modified decree. Appeal allowed in part.


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