State Bank of India, Super Market Branch, Gulbarga Vs Ravindra

@JUDGMENTTAG-ORDER

1. This revision petition is directed against the judgment and decree dated 16-11-1995 delivered by the Principal Civil Judge, Gulbarga (Mr. V.N. Madhava Reddy) in U.R. (S.C. No. 25 of 1995) in State Bank of India v Ravindra, dismissing/rejecting the plaintiff''s suit for the recovery of a sum of Rs. 18,080-60 against the defendant-respondent.

2. The facts of the case in nutshell are:

That according to the plaintiffs case the defendant-respondent, who was an unemployed youth, borrowed a sum of Rs. 15,000/- from the Bank on 24-2-1992 in order to do fertilizers business. As per the plaintiffs case the defendant-respondent agreed to repay the aforesaid amount which had been taken as loan with interest at the rate of 8% below S.B.I. advance rate, minimum 12% rising and falling therewith and it was agreed that defendant was to repay the said amount at 12% interest in 50 instalments at the rate of Rs. 300/- p.m. According to the plaintiff''s case the payment of instalment was to commence from 24-5-1992 i.e., first instalment had to be paid on 24-5-1992. According to the plaintiff, the loan was granted against hypothecation of steel racks, tables and chairs as security for the repayment of loan with interest. These items of equipments according to the plaintiff were in terms of the loan agreement and hypothecated to the plaintiff-Bank. The plaintiff''s further case is that the defendant has not paid any sum towards the loan or interest due to the Bank. Hence the plaintiff was constrained to file a suit for the recovery of the aforesaid sum with future interest at the rate of 12 1/2% p.a. from the date of the suit till complete realisation. The plaintiff alleged that in spite of repeated demands by the Bank and in spite of issuance of demand notices, the defendant did not come forward to pay the loan amount with interest due to the plaintiffs Bank and the defendant has been avoiding the Bank''s notice to shirk the responsibility. According to the plaintiff finally the Bank authorities asked the defendant on 5-8-1995 to pay the loan amount with interest, but on one pretext or other, he failed or neglected to pay the loan amount with interest. The plaintiff-Bank produced the particulars of amount due as mentioned in the Bank ledger. The plaintiff alleged that the cause of action accrued on 24-2-1992 when the defendant executed the agreement and security documents and when the Bank issued the notice. The plaintiff further alleged that the cause of action arose on 5-8-1995 when the defendant failed to pay the loan amount with interest on demands made by the plaintiff-Bank. As such the plaintiff prayed for a decree against the defendant-respondent for directing the defendant to pay the Bank a sum of Rs. 18,080-60 with interest at the rate of 12 1/2% p.a. from the date of the suit till the date of decree to be compounded quarterly together with costs.

3. The Office of the Principal Civil Judge, Gulbarga, raised objection to the maintainability of the suit on the ground of limitation. The office objection was to the effect that the loan was borrowed on 24-2-1992 and as per the Ledger extract the defendant has not paid even a single instalment as on the date of the suit and as such the suit is not filed within a period of three years. As such the suit has been barred by limitation on the ground that it has not been filed within three years from the date of cause of action.

4. The Court below heard the learned Counsel for the plaintiff and held that the cause of action for filing the suit did accrue in favour of the plaintiff immediately when the first instalment became due and was not paid by the defendant viz., date the first default did take place in the case and that the plaintiff (revision petitioner) could not be permitted to file the suit after waiting up to the expiry of 50 months and as such it found that the suit is barred by limitation and dismissed the suit and rejected the plaint.

5. Feeling aggrieved from the order aforementioned passed by the learned Principal Civil Judge, Gulbarga, rejecting the plaint and dismissing the suit as barred by time, the plaintiff has come up in revision u/s 18 of the Karnataka Small Cause Courts Act.

6. I have heard Sri U. Abdul Khadar, learned Counsel for the revision petitioner i.e., the Bank and Sri Sharanabasappa K. Babashetty, learned Counsel for the respondent.

7. The learned Counsel for the revision petitioner contended that it was in the absolute discretion of the plaintiff-Bank i.e., the revision petitioner to have either filed the suit for the recovery of the entire amount as the defendant-respondent committed first default or default of payment of any one of the instalments or it could file the suit after the expiry of 50 months or expiry of the period of 50 months from the date of agreement. The learned Counsel contended that as per the terms of loan transaction it was agreed that the amount of loan with interest shall be repayable in 50 instalments at the rate of Rs. 300/- p.m. commencing from 24-5-1992 and that the suit being based on one loan agreed to be repaid in instalments did fall within the framework of Articles 36 and 37 of the Limitation Act and so the suit was well within time, as the cause of action for filing such suit did accrue on each and every default and it was within the time and the plaintiff was entitled to a decree for the same, if not for the entire amount, at least for the sum relating to the instalments falling within three years immediately preceding the date of suit. The learned Counsel submitted that the suit was within time, as finally cause of action accrued on the failure of the defendant to pay even last instalment. In the alternative, the learned Counsel contended that even though some instalments were barred by limitation, the suit could be decreed for some of the instalments that fell due and were not barred by time on 4-9-1995 when the suit was filed. The learned Counsel contended that the Court below misconstrued Article 37 as well as failed to appreciate the principle under Article 37 of the Limitation Act, 1963. In support of his contentions, the learned Counsel for the revision petitioner made reference to the following decisions:

1. Lalta Prasad v Gajadhar Shukul.

2. Lasa Din v Gulab Kunwar and Others.

3. Kochappan and Others v Official Liquidator, Palmland Corporation Private Limited.

4. Badri Prasad and Another v Bhartu .

5. Gulzar Singh v Bank of Baroda.

8. On behalf of the respondent, the learned Counsel for the respondent Sri Sharanabasappa K. Babashetty has hotly contested the contentions made by the learned Counsel for the revision petitioner. The learned Counsel contended that in view of the terms of the loan agreement, the cause of action for filing the suit did accrue on first instalment having become due on 24-5-1992, as such the suit could be within three years from that date and the suit having not been filed within the period of three years from the date of first instalment becoming due, instead the suit was filed 4-9-1995, as such the suit was barred by limitation and the Court below rightly rejected the plaint on the ground that the suit was barred by limitation. The learned Counsel further contended that there is distinction between Article 36 and Article 37 of the Limitation Act, as per the language and terminology of the two articles. The learned Counsel contended that Article 36 of the Limitation Act, did not apply to the case instead Article 37 did apply and as such the suit as it was not filed within three years from the date of the default of first instalment, the suit was rightly dismissed. As there is no waiver or default of first instalment, limitation did start, continued to run and if the plaintiff did not file the suit, the suit had become barred by limitation. The learned Counsel for the respondent further contended that once the suit was filed for the recovery of money of the entire amount and the suit had become barred by time after 24-5-1995, no decree in favour of the plaintiff could be passed, as the suit has to be looked into in its complete form. In this connection, the learned Counsel for the respondent has made reference to the following decisions:

1. Mumford v Peal and Another

2. Jiwan Mal and Others v Jogeshwar Kasundhan .

3. Jawahar Lal v Mathura Prasad and Another .

4. Gokhul Mahton and Others v Sheoprasad Lal Sethi and Others¹.

5. Devidas Dhaniram v Parma Gokalia and Others².

6. M. Thirumalachariar v S.P. Varadappa Chettiar³.

9. Before I proceed to examine the case law cited by the learned Counsel appearing for the parties, it would be appropriate to examine Articles 36 and 37 of the Limitation Act, 1963 and similar Articles i.e., Articles 74 and 75 of the Limitation Act, 1908. Article 36 of the Limitation Act, 1963 reads as under:

10. The legislature when enacting the Limitation Act, with special intention has classified the cases and provided limitation for each category of cases separately and has very specifically provided as to when and from what date, the period of limitation has commence. Articles 36 and 37 contain different terms and expressions. Article 36 deals with the cases where the loan transaction had taken place and the suit is based on promissory note or bond which provides that the loan amount is payable or repayable by instalments. It applies to the cases where the money under promissory note or bond is payable by instalments. While Article 37 deals with and specifies the period of limitation and provides for date from which it is to start, with reference to specific type of cases i.e., suits where the suit is based on promissory note or bond where under the loan money is payable not only by instalments, but it addition to the term or condition that money is payable by instalments, the promissory note or bond further provides as a term thereof that if default is made in payment of one or more instalments the whole of the entire sum shall become due and payable or recoverable. Article 36 does not deal with such cases. Article 36 is analogous to the corresponding Article 74 of the Limitation Act, 1908, while Article 37 is analogous to the corresponding Article 75 of The Limitation Act, 1908. When I so observe, I find support for my view from the observations of Mr. Sulaiman, Chief Justice of Allahabad High Court, in the case of Jawahar Lal, supra. Their Lordships observed at page 665 of the said decision as under;

"Now Article 74 is the article applicable to simple bonds payable by instalments, in which case, time begins to run from the expiration of the term of payment. Article 75 applies to suits on a bond payable by instalments which provides that if default be made in payment of one or more instalments, the whole shall be due. It is obviously intended to apply to the particular case of instalment bonds where there is a default clause of the nature aforementioned. If there were no such default clause, the earlier article would apply".

11. Their Lordships further observed that "The expression in column 1 of Article 75 the whole shall be due", refers to the provisions in the bond sued upon. To my mind it implies nothing more than a mere sense of futurity and Article 75 would not be inapplicable merely because the bond goes on to provide further that the creditor would have an option to waive. In the same judgment King, J. as he then was observed and laid down as under:

"As the creditor was given authority to sue for the whole amount upon default being made in the payment of two successive instalments, it appears to me that this is equivalent to saying that if such default were made, then the whole amount should be "due"..... I think it must be held that the whole amount becomes "due" within the meaning of Article 75 upon that same date and that the period of limitation for a suit to recover the whole amount began to run from that date".

12. Justice King further observes that "in the present case, it seems to me, that the provisions of Article 75 are precisely applicable. If the creditor has a right to sue for the whole of the amount payable under the bond upon the occasion of a default made by the debtor, then it seems to me that limitation for a suit upon the bond begins to run against him as soon as the default is made. The suggested interpretation of Article 75 involves the view that although the instalment bond contains a default clause which entitled the creditor to sue for the whole amount as soon as the default was made, nevertheless, it is open to the creditor to ignore the default clause and to treat the bond, as if it were a single instalment bond governed by Article 74. With all due respect, I am unable to accept the suggestion as it seems to me that it conflicts with the provisions of Article 75".

13. The Allahabad High Court in the abovementioned case, explains the distinction between Articles 74 and 75 of the Limitation Act, 1908, which are in the same terms as Articles 36 and 37 of the Limitation Act, 1963. That these provisions of 1963 Act are intended by legislature to carry same interpretation as legislature i.e., Parliament has made use of the same expression and terminology as of Articles 74 and 75 of the Limitation Act, 1908.

14. The Full Bench decision of the Patna High Court has also expressed the same view in the case of Gokhul Mahton, supra, and it clearly laid down that Article 74 (which is analogous to the present Article 36 of the Limitation Act, 1963) did not apply to a case where the promissory note or bond contains the default clause in addition to the clause that money will be payable by instalments. In the Full Bench decision of the Patna High Court in the case of Gokhul Mahton, supra, dealing with Article 75 of the Limitation Act, 1908, to which Article 37 is analogous, Hon''ble Mr. Justice Wost observes as under:

"When the default is made" can have reference only to the default referred to in Article 75. In my judgment, it is impossible to get away from the construction that if the default clause appears in the bond, apart from the question of waiver the cause of action arose at the first default".

15. With these observations of Wost, J., Justice Varma also agreed. In this very judgment of Gokhul Mahton''s case, supra, Manohar Lall, J. points out the distinction between Article 74 and Article 75 and observes at page 440 as under:

"Again it must be kept in view that there is a well defined distinction between Articles 74 and 75 of the Limitation Act. Article 74 applies to an instalment bond which does not contain any default clause and therefore in such cases the plaintiff is entitled, by the very terms of the bond to sue only for such instalment as remains unpaid. No question of waiver of default can ever arise in such a case. But where the document provides that in the case of a default (which may be due to non-payment of one instalment or more than one instalment as provided in the bond) the obligee has the right to sue for the whole of the sum then remaining due, it is obvious that the promisor has a right [co instant] to pay the full amount and the obligee a corresponding right to receive and recover it. Article 75 provides in column 3 how the starting point of limitation should be calculated in such a case, the starting point of limitation is, in the first instance, the date of the default, but this starting point can be carried forward only if the default is waived".

Dealing with the question of waiver, their Lordships observe as under;

"The weighty observations of Lord Denman and Fry, J., quoted in the Order of Reference correctly indicate how this question should be determined. It is there laid down that mere failure to sue or inaction by the creditor is not a waiver of the default, something else must be established to show that the promisee has waived his rights".

16. The same principles do with same force emerge from Articles 36 and 37 of Limitation Act, 1963. That the Articles 36 and 37 of the Limitation Act, 1963 bear the same distinctive position as do from Articles 74 and 75 of the Limitation Act, 1908. In other words, a case or suit based on promissory note or bond payable by instalments simpliciter may be covered by Article 36 of the Limitation Act, 1963, but where the case is one, based on promissory note or bond payable by instalments which promissory note or bond further provides that in case of default being made in the payment of one or more instalments, the whole amount shall become due to such cases. Limitation of three years has to be counted as mentioned in column 3 to Article 37 viz., when the default is first made of the instalment or instalments as provided in the agreement, except in a case where obligee i.e., creditor has waived or waives his right to sue for whole amount, but in a case where the case is based on promissory note or bond payable in instalments with no default clause no doubt Article 36 may apply and the creditor file the suit on default of payment of one or more instalments, for money under those instalments or instalment of which default is committed.

17. In the present case, it will be appropriate to examine and quote the terms of the bond or composite loan agreement. Clause 9 of the said agreement reads as under:

"If the borrower commits default in payment of any one of the instalments of the term loan and the balance of interest and on demand, the amount due and outstanding on the working capital component, the Bank shall in its absolute discretion be entitled to call upon the borrower to repay forthwith the entire balance of capital loan then outstanding together with accrued interest".

18. Clause 14 of the agreement is also very material and it reads as under:

"Notwithstanding what is stated in the foregoing clauses, the amount due under the capital loan account shall become repayable to the Bank forthwith on the occurrence of any one of the following events/circumstances:

(b) any instalment of principal as provided in Clause 4 above remaining unpaid after the due date for payment thereof has expired.

(c) any interest remaining unpaid and in arrears after the same shall became due".

Clauses (a) and (d) to (g) are not relevant nor material for the purpose of question involved in the present case.

19. A reading of the two clauses of the agreement clearly reveals that as soon as any instalment of principal and interest as provided in Clause 4 above remaining unpaid after the due date for payment thereof has expired, according to Clause 14, the entire amount shall become repayable to the Bank and Clause 9 clearly provides that the Bank becomes entitled to call upon the borrower to repay forthwith the entire balance of capital loan then outstanding together with accrued interest. When the right has been conferred as has been provided to recover whole amount and as the whole amount has become due and repayable on the failure of the defendant to pay the first instalment or instalment as provided, then the time or period of limitation for filing of the suit had to be counted from that date i.e., 24-5-1992, as according to the plaintiff, the defendant had not paid any sum either first instalment or later instalments. In this view of the matter, in my opinion, the limitation for the suit had to be counted from the date of the first default made, unless the plaintiff had pleaded waiver or alleged the facts showing waiver on his part and when I observe, I find support from the above two full bench decisions of the Allahabad and Patna High Courts as well as the other decisions of the Allahabad, Madhya Pradesh, Madras High Courts in the cases of Mumford, Devidas Dhaniram and M. Thirumalachariar, supra.

20. It has been contended that when the suit was not filed on the occurrence of the first default and the plaintiff-Bank waited till expiry of the period, it may be taken that the plaintiff had waived the benefit of the provision of default clause in the loan agreement. I am unable to accept this contention. Waiver is a mixed question of law and fact. Waiver is not mere inaction. Waiver is abandonment of a right and it must be intentional. Intention to waive the right by the plaintiff must be manifest by some overt Act. Mere abstinence from suing for the whole amount due on default without any overt act in that regard does not constitute waiver. The fact of waiver to sue must be specifically pleaded with particulars and circumstances showing or exhibiting waiver of right accruing on default.

21. In the case of Mumford, referred to above, the Division Bench of the Allahabad High Court observes that waiver must be intentional act with knowledge and it is incumbent on any party insisting on agreement in substitution of a written contract to show both parties had the substituted agreement. Mere absence from enforcing a legal right at the time when the cause of action arose will not amount to waiver.

22. In the case of Sukh Lal v Bhoora, dealing with the expression waiver, the Division Bench of the Allahabad High Court observes as under:

"That doctrine is invoked against a creditor, whereas the waiver of the benefit spoken of in Article 75 is something exercised for the benefit of the creditor and not against him. The waiver therefore may be a purely one-sided act and need not be for consideration proceeding from the debtor. The waiver may be by expression of an intention to waive the benefit either by communication of the debtor or by any other overt act. Waiver is a mixed question of law and fact. It depends on the circumstances of each case. It necessarily follows that a mere inaction or omission to sue within the prescribed period cannot amount automatically to a waiver within the meaning of the third column of this Article".

23. In the case of Devidas, supra, the Madhya Pradesh High Court has also laid down that waiver must be specifically, pleaded and must also be proved. The onus of proving waiver is on the creditor. Here in the present case, there is no such pleading of waiver nor any fact constituting the waiver or exhibiting. Waiver has been alleged in the plaint what to say of being proved. It is merely being argued that abstinence from filing the suit as waiver, I am unable to accept this contention. The decision relied on by the learned Counsel for the revision petitioner i.e., Lasa Din''s case, supra, and decision of the Allahabad High Court in Lalta Prasad''s case, supra, are distinguishable. The following observations in Lasa Din''s case, supra, made by their Lordships of the Privy Council are relevant and may be quoted in extenso to point out the distinction.

"Their Lordships are not greatly opposed by the authority of Reevat v Butcher (2). It is they think always dangerous to apply English decisions to the construction of an Indian Act. The clause there under consideration differed widely from that now before their Lordships and indeed from the clauses with which the Allahabad Court had to deal the question for decision would have fallen in India not under Article 132, but under Article 75 which is in very special terms".

24. Their Lordships of the Privy Council thus indicate that Article 132 which their Lordships were considering was distinct from Article 75. Article 7.5 was an article of special terms and distinct nature than Article 132. Under Article 132 of the Limitation Act, 1908 their Lordships were dealing with the expression "where money sued for become due" used in Article 132 and its meaning in the context of the mortgagor''s right to redeem and the mortgagee''s right to enforce his security and laid down law, under Article 132 to the effect, that the mortgage money in case covered by Article 132 does not become due, within the meaning of Article 132, until both mortgagor''s right to redeem and mortgagee''s right to enforce his security have accrued.

Any other meaning under that Article 132 as expressed by the Hon''ble Waza Hasan J., of Oudh, Chief Court their Lordships of the Privy Council did not uphold, as it had tendency to defeat the intention of parties vide observations in column 1 of page 211 of the report in this regard.

25. Article 132 of the Limitation Act, 1908 in same terms as Article 63 of Limitation Act, 1963 and Article 75 is as Article 37 of the new Limitation Act. Their Lordships of the Privy Council did bear and expressly pointed out that two articles are distinct according to their Lordships. It appears that the later observations of their Lordships of the Privy Council escaped the notice of the Division Bench. So Lalta Prasad''s case, supra, cannot be made applicable to the present case.

26. The decision of the Kerala High Court relied upon by the learned Counsel for the revision petitioner namely Kochappan''s case, supra, is distinguishable and cannot apply to the facts of the present case. As in Travancore Chitties Act, it was obligatory on the foreman to demand in writing the entire future subscriptions in a lump and since such a notice had not been given, the foreman was allowed to recover the amount that fell due within three years of the suit. As mentioned earlier, Article 36 does not apply to the present case. There is no waiver of the right that had accrued nor the facts in this regard have been stated or brought on record. Article 36 cannot apply to the present case, as it is a case based on bond or agreement which as per clauses 9 and 14 provides that entire or entire balance money will become payable and duo, and the creditor will be entitled to realise the full or entire amount on the default of any one of the instalments. The right and cause of action to file the suit as such accrued on 24-5-1992 and limitation did run till 24-5-1995 and as the suit was filed on 4th September, 1995, as such the Court below rightly rejected the plaint and dismissed the suit.

27. The decision in the case of Gulzar Singh, supra, decided by the Allahabad High Court, on 19-11-1987 and reported in All India Banking Law Judgments is not very clear on the facts and so is not of any help to the revision petitioner. Had there been any Article in the nature of Article 15 of the Limitation Act, 1963 with reference to the suits on promissory note or bond. The plaintiff-revision petitioner''s argument that the plaintiff filed the suit after the expiry of 50 months period could have had some weight, but there is no such provision. Article 15 by itself is not applicable to the case of the revision petitioner. Thus remedy to recover by mode of suit was rightly held barred by limitation, even if debt liability did not stand discharged.

28. Thus considered, the revision petition has got no merit and it is dismissed.

29. The judgment and decree of the Court below rejecting the plaint are maintained. Costs made easy.