K.L. Manjunath, J.@mdashThe appellant is questioning the legality and correctness of the order dated 23.6.2012 passed by the Court of Prl. District and Sessions judge, Bangalore Rural District, Bangalore in Misc. Petition No. 54/2010, whereunder the petition filed by the respondent Karnataka State Industrial Investment and Development Corporation Ltd. (''KSIIDC'' for short) u/s 31(1)(aa) of the State Financial Corporation Act, 1951 is allowed directing the appellant to pay a sum of Rs. 1,35,21,187.36 as on 16.9.1998 jointly and severally payable by the respondent Nos. 2 and 3 therein with future interest at the rate of 12% p.a. from the date of petition till the date of realisation.
2. Heard learned counsel for the parties. For the sake of convenience, parties would be referred to as per their ranking before the Court below.
3. The facts leading to this appeal are as hereunder:
M/s. Kemptrode Industries Pvt. Ltd. made an application for sanctioning the loan for its business purpose. Accordingly, a sum of Rs. 1.00 crore was sanctioned. The Company, represented by its Directors, executed a loan agreement on 20.4.1995 agreeing to repay the loan of Rs. 1.00 crore in four quarterly installments of Rs. 25.00 lakhs each after an initial moratorium period of six months from the date of disbursement. It was agreed that the loan amount shall be repayable with interest at the rate of 18% p.a. and in case of default, interest at the rate of 20.5.% p.a. to be compounded periodically.
It is the specific case of the petitioner that respondent Nos. 2 and 3 stood as guarantors on 28.4.1995 as security to the loan advanced to the Company. It is a continuing guarantee. They pledged Rs. 3,50,000.00 shares of the face value of Rs. 100.00 each of M/s. Nucor Wires Ltd. held by M/s. Trident Impex Pvt. Ltd., for which Companies the respondent Nos. 2 and 3 were Directors. On account of winding up of the Company, the shares of the Company became non-est. Since the original borrower Company did not repay the debt, petition came to be filed to recover the amount from the guarantors.
The guarantors admitted their default in payment of the loan. However, they agreed to clear the loan by May 1997. Since, the respondent Nos. 2 and 3 continued to commit the default, on 28.8.1997, a cheque for Rs. 2.00 lakhs was paid with an assurance that substantial amount would be paid in September 1997. Since there is a failure on the part of the guarantors to repay the debt, notice was got served on the second respondent calling upon him to pay a sum of Rs. 1,35,21,187.36/- with interest at the rate of 20% p.a. and thereafter the petition came to be filed.
On service of notice, the Company (original borrower) remained absent. The third respondent-guarantor was placed exparte. The second respondent-Mr. N.T. Sebastian, who is the appellant in this appeal alone contested the matter.
It is the case of second respondent-appellant that Canara Bank has already filed the proceedings against the borrowing Company and obtained a recovery certificate and the matter is pending before the Debts Recovery Tribunal, Bangalore and that the original borrower Company (first respondent) has paid Rs. 25.00 lakhs. The third respondent, in collusion with others illegally floated a company identical to the name of first respondent Company and another Company, viz., M/s. Kemtrode Pvt. Ltd., and M/s. Nucor Wires Ltd., and also manufactured welding rods impersonating the first respondent Company contending that the first respondent has suffered huge loss and further contending that the interest charged by KSIIDC is on the higher side and contrary to R.B.I. Guidelines and the decision of Apex Court and that therefore requested the Court to dismiss the petition.
Based on the above pleadings, the following points were formulated by the Court below for its consideration. The same are as follows:-
"1) Whether the petitioner proves that the respondents are due for a sum of Rs. 1,35,21,187.36 as on 16.09.1998 with future interest at 20% jointly and severally?
2) Whether the petition is barred by time?
3) What order?".
4. In order to prove the case of the parties, on behalf of KSIIDC, one Sri N. Manjunath was got examined as PW 1. He relied on Exhibits P1 to P12. The appellant herein alone came to be examined as RW 1 and got marked Exhibits R1 and R2.
5. The Court below after considering the entire evidence held point Nos. 1 and 2 in the affirmative and allowed the petition by directing the appellant and other guarantors to make good the payment. Aggrieved by the same, present appeal is filed.
6. Learned counsel for the appellant has raised several grounds in the appeal memo. At the time of arguments, he has canvassed the following three points only. According to him, initially the petition was filed before the Court of City Civil Judge, Bangalore, which had no territorial jurisdiction to entertain the petition. Later on, the same was got transferred to the Court of Prl. District and Sessions Judge, Bangalore Rural District, Bangalore. The matter was pending before the Court of City Civil Judge, Bangalore which had no territorial jurisdiction for nearly 12 years and therefore the period of limitation is to be reckoned from the date of re-presenting the papers before the Court of Prl. District and Sessions Judge, Bangalore Rural District, Bangalore and that therefore he contends that the petition filed by the respondent-KSIIDC was barred by limitation.
7. In support of his arguments, he has relied on the Hon''ble Apex Court''s decision in the case of
8. He lastly contends that the interest awarded at 12. %p.a. from the date of presentation of the original petition before the wrong Court is also incorrect and at best, the Court below was required to order pendente lite interest, from the date on which the case was transferred to the Court of Prl. District and Sessions Judge, Bangalore Rural District. Bangalore from the Court of City Civil Judge, Bangalore.
9. Learned counsel appearing for the respondent No. 3 submits that none of the grounds urged by the appellant are tenable. According to him, KSIIDC had wrongly filed the petition before the Court of City Civil Judge, Bangalore instead of presenting it before the Court of Prl. District and Sessions Court, Bangalore Rural District, Bangalore, which was competent to try the petition. Having realised the mistake committed by the respondents, KSIIDC had filed a petition before this Court u/s 24 of C.P.C. to transfer the matter from the Court of City Civil Judge, Bangalore to the Court of Prl. District and Sessions Judge, Bangalore Rural District, Bangalore, which petition came to be allowed and by virtue of the same, the matter was transferred to the proper Court. Therefore, he contends that in view of paragraph No. 6 of the judgment in the case of ONGC LTD. (supra), the ground No. 1 urged by the appellant has to be rejected.
10. He further contends that so far as the statement of accounts are concerned, the account extracts produced through evidence of PW 1, Sri N. Manjunath, is not disputed by the appellant while cross-examining PW 1. In other words, the claim made by the respondent is not denied by the petitioner. Therefore, he requests this Court to reject the second ground urged by the appellant.
11. He lastly contends that in view of transfer of the petition from the Court of City Civil Judge, Bangalore to the Court of Prl. District and Sessions Judge, Bangalore Rural District, Bangalore pursuant to the order passed u/s 24 of C.P.C., the Court below is justified in awarding interest from the date on which the petition was presented before the Court of City Civil Judge, Bangalore. Therefore, he requests this Court to dismiss the appeal.
12. Having heard learned counsel for the parties and upon perusal of the evidence, we have to consider the three grounds urged by the appellant.
13. So far as ground No. 1 is concerned, admittedly, Misc. Petition No. 569/1999 was filed by KSIIDC before the Court of City Civil Judge, Bangalore in the year 1999 and thereafter the petition was filed. u/s 24 of C.P.C. before this Court in C.P. No. 156/2009, which came to be allowed on 19.2.2010. In view of the order of transfer u/s 24 of C.P.C., the question is whether the provisions of Order VII Rule 10A of C.P.C. would be applicable if a case is transferred from one Court to another based on the order passed u/s 24 of C.P.C. The Hon''ble Apex Court in paragraph No. 6 of its decision in the case of ONGC LTD. (supra) has held as under:-
6. The High Court while passing order dated 18.3.1997, did not exercise its power of transfer u/s 24 of Code of Civil Procedure; rather the language used in the said judgment makes it clear that the return of the plaints was required in view of the provisions of Order VII Rule 10 Code of Civil Procedure. xxxxxx"
14. In view of the same, we are of the view that there is a difference between transfer of case u/s 24 of C.P.C. and returning of plaint under Order VII Rule 10 to re-present the same before the other Court. When it is a case for transfer, the question of considering limitation from the date on which the case had been transferred to the Court of Prl. District and Sessions Judge, Bangalore Rural District, Bangalore does not arise. Accordingly, the first ground urged by the appellant has to be rejected.
15. So far as the second ground is concerned, in the examination-in-chief of PW 1, KSIIDC has produced the statement of accounts claiming the suit claim. Unfortunately, appellant''s counsel has not even cross-examined PW 1 and the contents of accounts extract is neither disputed nor denied by the appellant. In other words, counsel for the appellant has not cross-examined PW 1 with regard to genuineness of the entries made in the accounts extract produced by PW 1, which is a Financial Institution, where presumption is attached to the accounts extract maintained by such Financial Institution as per Bankers'' Books of Evidence Act, 1891. Therefore, the second ground urged by the appellant is to be rejected.
16. So far as the last ground is concerned, in view of specific finding that Order VII Rule 10 of C.P.C. did not attract to the facts of the case in view of the order of transfer of case u/s 24 of C.P.C., if the Court below has awarded interest at 12%, which is much less than the agreed rate of interest from the date of presentation of the petition, the same cannot be interfered with.
17. As a matter of fact, the Hon''ble Apex Court in the case of
"6. If as held by this Court the proceeding instituted under Sec. 31(1) of the Act is something akin to an application for attachment of property in execution of a decree at a stage posterior to the passing of the decree no question of passing any order under Sec. 34 of the Code would arise since Sec. 34 of the Code would be applicable only at the stage of the passing of the decree and not to any stage posterior to the decree It may also be mentioned here that even under the Code the question of interest payable in mortgage suits filed in civil courts is governed by O. 34, R. 11 of the Code and not by S. 34 of the Code which may be applicable only to cases of personal decrees passed under O.34, R.6 of the Code. The High Court was right in holding that interest would be payable on the principal amount due in accordance with the terms of the agreement between the parties till the entire amount due was paid as per the order passed under Sec. 32 of the Act. We hold that the decision of the Karnataka High Court, referred to above, which has applied Sec. 34 of the Code to a proceeding instituted under S. 31(1) of the Act is not correctly decided."
18. In view of the aforesaid decision and reasons, we do not find merit in this appeal. Accordingly, the appeal is dismissed.
