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N. Sanjeeva and anr. Vs. State Bank of Travancore - Court Judgment

LegalCrystal Citation
CourtDRAT Madras
Decided On
Judge
Reported inII(2006)BC158
AppellantN. Sanjeeva and anr.
RespondentState Bank of Travancore
Excerpt:
.....june 25, 1993, till realisation against one m. k. kumar, the first defendant and proprietor of shree durga packaging and allied industries and shree durga prints and the appellants herein, namely n. sanjeeva and narayana udupa, and the same was transferred to drt-ii, chennai, and it was taken on file as t.a. no. 230 of 2001.3. the business was originally carried on as partnership firm consisting of kumar and sanjeeva by partnership deed dated february 15, 1981, and for the said partnership business. cash credit (mundy) limit of rs. 2,60,000 was granted for which defendants nos. 1 and 2 have executed necessary documents. the bank also granted overdraft (supply) facility to a limit of rs. 2 lakhs for which also they have executed necessary documents. the first and second defendants.....
Judgment:
1. This regular appeal is directed against the order dated March 9, 2005, passed in TA No. 230 of 2001 by the DRT-II at Chennai. The second and third defendants are the appellants.

2. The first respondent-bank filed a suit in C.S. No. 1536 of 1993 before the High Court of Madras for recovery of a sum of Rs. 39,01,158.78 together with interest at 17.75 per cent, per annum from June 25, 1993, till realisation against one M. K. Kumar, the first defendant and proprietor of Shree Durga Packaging and Allied Industries and Shree Durga Prints and the appellants herein, namely N. Sanjeeva and Narayana Udupa, and the same was transferred to DRT-II, Chennai, and it was taken on file as T.A. No. 230 of 2001.

3. The business was originally carried on as partnership firm consisting of Kumar and Sanjeeva by partnership deed dated February 15, 1981, and for the said partnership business. Cash credit (mundy) limit of Rs. 2,60,000 was granted for which defendants Nos. 1 and 2 have executed necessary documents. The bank also granted overdraft (supply) facility to a limit of Rs. 2 lakhs for which also they have executed necessary documents. The first and second defendants dissolved the firm on April 1, 1985, by which the first defendant took over the business of Shree Durga Packaging and Allied Industries as a sole proprietor.

Though the firm was dissolved, the second and third defendants have executed revival letters thereby agreeing to guarantee the loan granted to the firm. Thereafter, the first defendant as a sole proprietor of Shree Durga Packaging and Allied Industries, borrowed amount on cash credit (book debt) limit of Rs. 2 lakhs and the same was also enhanced.

Overdraft (clean) facility limit was also granted to the first defendant as a proprietor. By a tripartite agreement entered into on November 13, 1990, the first defendant had acknowledged a sum of Rs. 8,50,448.25 as the amount due to the bank and further admitted that a sum of Rs. 9,33,360.47 as an aggregate amount due to the plaintiff by the first defendant as a sole proprietor of Shree Durga Packaging and Allied Industries in respect of (1) cash credit (mundy) limit, (2) cash credit hypothecation (book debt) limit and (3) overdraft (clean) limit.

4. It is the further case of the respondent bank that the first defendant was also carrying on the business as sole proprietor in the name and style of Shree Durga Prints and the first defendant availed loan such as cash credit and executed necessary documents thereof. Two medium term loans were also granted to the first defendant and they had also executed mortgage of the properties. As the defendants have not paid the amount due, the respondent-bank filed the suit for recovery of the amount.

5. Defendants Nos. 2 and 3 resisted the claim by filing separate written statements. The second defendant in his written statement has stated that there is a misjoinder of parties and misjoinder of cause of action and on that ground alone, the suit is liable to be dismissed.

This defendant has nothing to do with Shree Durga Prints, which was a sole proprietary concern of the first defendant and the transaction in respect of which this defendant has nothing to do, but was clubbed together alongwith another concern of which the first defendant was the sole proprietor and clubbing of these two transactions amounts to misjoinder of parties. No relief can be sought against the second defendant in respect of Shree Durga Prints account. It is further submitted that Shree Durga Packaging and Allied Industries, which was once a partnership firm was dissolved by the deed of dissolution dated April 1, 1985, and thereafter, the first defendant became the sole proprietor and as such, the entire transaction prior to the dissolution came to an end including the liability of this defendant. The respondent-bank also entered into an agreement with the first defendant without any reference to this defendant which amounts to a novation of contract and thereby the liability of this defendant was relinquished and discharged. The defendant also denies execution of any revival letter, balance confirmation letter, as stated by the respondent-bank and hence the claim against the defendant is barred by limitation.

6. The third defendant (second appellant) filed a separate written statement by adopting the written statement filed by the second defendant (first appellant) and also further stated that there was no cause of action as against this defendant as the debt against the principal debtor itself is barred by time. It is further stated that this defendant has nothing to do with the plaintiff's transactions relating to Shree Durga Prints of which the first defendant was the sole proprietor. He denied the execution of revival letters and the confirmation of balance letter also. It is further stated that the debt due even against the first defendant is barred by time and, therefore, the claim against this defendant also is barred by time.

7. The DRT after taking into consideration all the aspects of the case came to the conclusion that the respondent-bank has proved its claim and decreed the suit holding that the bank is entitled for recovery of the sum of Rs. 13,68,019.55 against all defendants D1, D2 and D3 in respect of Shree Durga Packaging and Allied Industries, and for a sum of Rs. 25,33,131.23 against the first defendant (Rs. 15,52,524.17 in respect of Shree Durga Packaging and Allied Industries + Rs. 9,80,607.06 in respect of Shree Durga Prints) together with interest at 17.75 per cent, per annum from June 25, 1993, till the date of realisation.

9. The learned advocate for the appellants assailed the validity of the order passed by the DRT on three grounds : (1) There is a misjoinder of parties and misjoinder of cause of action ; 10. It is the contention of the learned advocate for the appellants that there are two distinct industries/companies namely, Shree Durga Packaging and Allied Industries, which was one partnership concern and after the dissolution of the partnership on March 30, 1985, M.K. Kumar became the sole proprietor of the said firm. M/s. Shree Durga Prints is a proprietary concern from the beginning and the appellants (defendants Nos. 2 and 3) have nothing to do with the said company and, therefore, the single action brought against the defendants is not maintainable.

It is also submitted that loans were taken on different dates by these two companies and, therefore, there is a misjoinder of cause of action.

11. Now let us consider who may join as defendants. Order 1, Rule 3 of the Civil Procedure Code states, "All persons may be joined in one suit as defendants where-- (a) any right to relief in respect of, or arising out of, the same act or transaction or series of acts or transactions is alleged to exist against such persons, whether jointly, severally or in the alternative ; and (b) if separate suits were brought against such persons, any common question of law or fact would arise.

12. A plain reading of this section enables the plaintiff to bring a single suit arising out of some act or transaction or series of acts or transaction and whether the liability of those persons joint, several or alternative.

13. Though the first respondent-bank claimed two separate kind of reliefs, i.e., joint and several liability as against defendants Nos. 1 to 3 in respect of Shree Durga Packaging and Allied Industries and made a separate and individual claim as against Shree Durga Prints, of which the first defendant was a proprietor, in order to avoid unnecessary multiplicity of proceedings, the bank had brought about a single suit clubbing the reliefs against the defendants by showing different heads under which the defendants are jointly and severally liable and also separately showing the liability of the first defendant in respect of certain debts. When the reliefs sought for against the defendants are distinctly and separately shown, there may not be any difficulty in executing a decree when it is passed. When there is no ambiguity or difficulty in executing a decree, I am of the view that clubbing of several claims in one and the same suit will not be a bar. But on the other hand, if the plaintiff relinquishes a part of his claim, he cannot claim afterwards and if the plaintiff wants to sue for all or any of such reliefs but if he omits, except with the leave of the court to sue for all such reliefs arising out of the same cause of action, which he cannot do without the leave of the court as provided under Order 2, Rule 3 of the Civil Procedure Code. That in respect of making a claim in piece-meal and also getting leave of the court, it may not be inappropriate to file a single suit against the defendants arising out of the same cause of action. Further, no suit shall be defeated by reason of misjoinder or non-joinder of parties and the court may in every suit deal with the matter in controversy so far as regards the rights and interests of the parties actually before it, as stated in Order 1, Rule 9 of the Civil Procedure Code. Further, the action is brought under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, and the Tribunal is constituted for expeditious adjudication and recovery of debts due to banks and financial institutions and as such, the contention of the appellants that the suit is liable to be dismissed for misjoinder of parties and misjoinder of cause of action could not be accepted.

14. It is the contention of the learned advocate for the appellants that the partnership was entered into on February 15, 1981, for the running of Shree Durga Packaging and Allied Industries by Kumar and Sanjeeva (defendants Nos. 1 and 2) and the same was dissolved on March 30, 1985. It is submitted that thereafter, defendants Nos. 2 and 3 did not have any connection with the said business and hence the claim against them is barred by time.

15. On the contrary, the learned advocate for the respondent-bank would contend that defendants Nos. 2 and 3 have executed revival letters exhibits A5 and A6 dated February 21, 1985, and they were prior to the dissolution of the partnership. That thereafter also, the second defendant had executed revival letter dated December 17, 1987 (exhibit A7) and the third defendant executed revival letter on December 14, 1987 (exhibit A8). It is submitted that limitation to enforce payment of money secured by mortgage in respect of immovable property or otherwise charged upon the immovable property is 12 years and the suit was filed in the year 1993 and the same is in time.

16. It is on record that the partnership was dissolved on March 30, 1985, and therefore, the revival letters said to have been given by defendants Nos. 2 and 3 on December 17, 1987 (exhibit A7) and December 14, 1987 (exhibit A8) are of no value and it is left unexplained. In fact, the appellants have denied the execution of those letters and the respondent has not proved its execution. Most probably, the statement of the appellants that the bank had taken their signatures in several printed blank forms may be true and they have been made use of by the respondent to overcome the limitation. There was no need nor necessity to execute the alleged revival letters and they are also proved invalid and inadmissible. Hence, the claim against the appellants is barred by time.

17. The next contention of the appellants is that after the dissolution of the partnership on March 30, 1985, the respondent-bank advanced loan to the first defendant namely Kumar, in his individual capacity, and the same is also accepted in the plaint itself in para. 8A, wherein it is stated that cash credit (book debt) is Rs. 2 lakhs. In respect of that loan the first defendant, as the sole proprietor of Shree Durga Packaging and Allied Industries, executed documents, viz., demand promissory note dated July 2, 1986 and other documents. This would clearly indicate that after the dissolution of the partnership the respondent-bank had accepted the first defendant as a borrower and got necessary documents from him and it is, therefore, contended that it is clear novation of the contract, which discharges the appellants from the liability. Section 62 of the Contract Act deals with novation of contract, which states, "if the parties to a contract agree to substitute a new contract for it, or to rescind or alter it, the original contract need not be performed". The third defendant who stood as a guarantor also stands discharged by variance in terms of the contract, as the said variance was done without his consent as provided under Section 133 of the Contract Act which states, "Any variance made without the surety's consent, in the terms of the contract between the principal debtor and the creditor, discharges the surely as to transactions subsequent to the variance". As the bank entered into a new contract with the first defendant after the dissolution of the partnership without the consent of the third defendant, he is discharged by the said variance of the new contract, irrespective of any agreement said to have been executed by the third defendant. As such, the third defendant is also not liable to pay any amount to the respondent-bank.

18. In the result, the appeal is allowed. The order and decree passed against the appellants/defendants Nos. 2 and 3, is set aside. But however, the respondent-bank is entitled to proceed against the first defendant for recovery of the amount, as per the order and decree passed in TA No. 230 of 2001.


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