Piar Singh Rana, J.@mdashPresent civil suit is filed for the recovery of Rs. 90,67,466/- (Ninety lacs sixty seven thousand four hundred sixty six) on account of principal amount and interest.
BRIEF FACTS OF THE CASE:
2. It is pleaded that plaintiff bank is constituted under the provision of HP Cooperative Societies Act. It is further pleaded that Managing Director of plaintiff bank is competent to represent plaintiff bank and has authority to sign, verify plaint and swear in affidavit, file application and engage Advocate. It is further pleaded that Sh Rajinder Singh son of Sh Kehar Singh is the Managing Director of plaintiff bank and is competent to file present suit. It is further pleaded that defendant No. 1 is a body of Corporate established under the provisions of State Financial Corporations Act 1951. It is further pleaded that defendant No. 1 floated a scheme in the year 2005 regarding SLR bonds. It is further pleaded that plaintiff bank had purchased bonds under the scheme worth Rs. 6 crores on 14th December 2005. It is further pleaded that maturity date of bond was 12.2.2011. It is further pleaded that plaintiff bank thereafter on dated 15.12.2005 also purchased bonds to the tune of Rs. 3,50,00,000/- (Three crores fifty lacs). It is further pleaded that purchased bond was to mature in the month of February 2011. It is further pleaded that bond to the tune of Rs. 9,50,00,000/- (Nine crores fifty lacs) was to bear interest at the rate of 8% per annum. It is further pleaded by plaintiffs that defendant No. 1 did not pay interest on the bonds as scheduled. It is further pleaded that total interest accrued on the principal amount of bonds comes to Rs. 76 lacs. It is further pleaded that defendant No. 2 is a State Government of Utter Pradesh and is the guarantor of payment of principal amount invested in the bonds. It is further pleaded that scheme was floated by defendant No. 1 with the approval of defendant No. 2. It is further pleaded that on account of non payment of interest by defendants, plaintiffs have suffered great financial loss. It is further pleaded that defendant No. 1 through communication dated 12.11.2006 requested plaintiffs to accept only principal amount and waive the interest. It is further pleaded that thereafter plaintiffs repeatedly requested defendants to pay interest to the tune of Rs. 76 lacs but despite repeated requests defendants did not pay interest amount. It is further pleaded that thereafter legal notice under Section 80 CPC was served. It is further pleaded that despite legal notice defendants failed to liquidate the liability. It is further pleaded that cause of action has accrued to plaintiffs on dated 14.12.2005 and 15.12.2005 and further arose on dated 12.8.2006, 12.2.2007, 31.8.2006 and 28.2.2007. It is further pleaded that cause of action further accrued to the plaintiffs on dated 28.6.2008. Prayer for decree of suit as mentioned in relief clause of plaint sought.
3. Per contra written statement filed on behalf of defendant No. 1 pleaded therein that no cause of action accrued to the plaintiffs in Himachal Pradesh. It is further pleaded that contract of payment of interest entered into with bond holders has frustrated and same could not be enforced. It is further pleaded that plaintiffs have no locus standi to file present suit through authorized person. It is further pleaded that U.P. Financial Corporation is a statutory body established under the provisions of State Financial Corporations Act 1951. It is further pleaded that bonds were purchased by plaintiff No. 1 through open market subject to all credit risk. It is further pleaded that plaintiff bank has no legal right to enforce the liability of interest against co-defendant No. 1 in view of poor financial status of co-defendant No. 1. It is further pleaded that Small Industrial Development Bank of India has also totally stopped refinancing of loans in respect of defendant No. 1. It is further pleaded that defendant No. 1 has approached various bond holders for one time settlement and for waiver of interest but plaintiff bank did not agree. It is further pleaded that suit is barred by limitation as same was filed beyond three years. Prayer for dismissal of suit sought.
4. Per contra separate written statement filed on behalf of co-defendant No. 2 pleaded therein that Hon''ble High Court of HP has no jurisdiction to try the suit. It is further pleaded that none of the defendants reside at Shimla or in Himachal Pradesh nor carry any business at Shimla. It is further pleaded that in fact plaintiffs have entered into contract for purchase of bonds from open market at Kanpur U.P. It is further pleaded that suit is barred by limitation. It is further pleaded that contract between plaintiffs and defendant No. 1 has frustrated as per provision of Section 56 of Contract Act. It is further pleaded that suit ought to have been filed before Debt Recovery Tribunal Allahabad. It is further pleaded that present suit is not filed through competent person. It is further pleaded that bonds purchased by plaintiffs from open market subject to credit risk. It is further pleaded that plaintiff bank has no legal right to enforce the liability of interest. It is denied that co-defendant No. 1 is the guarantor relating to payment of interest and principal amount. It is further pleaded that co-defendant No. 2 has no link with co-defendant No. 1. It is pleaded that one time settlement was offered to various bond holders. Prayer for dismissal of suit sought.
5. On dated 13.12.2010 following issues were framed by Court:
"1. Whether plaintiffs are entitled to the suit amount if so at what rate of interest? ...OPP.
2. Whether suit is not maintainable as alleged? ...OPD
3. Whether plaintiffs have no locus standi to file and maintain the present suit? ...OPD
4. Whether this Court has no jurisdiction to try the present suit if so its effect? ...OPD.
5. Whether contract has become frustrated on account of subsequent events if so its effect? ...OPD-2.
6. Whether suit has not been filed through a competent and authorized person if so its effect? ...OPD.
7. Whether suit is barred under the provisions of Recovery of Debt due to Banks and Financial Institutions Act 1993? ...OPD-2.
8. Whether suit is not within time? ...OPD.
9. Relief."
6. Parties produced following witnesses in support of their case.
7. Parties also produced the following pieces of documentary evidence in support of their case.
8. Court heard learned Advocate appearing on behalf of the parties at length and also perused the entire record carefully.
9. Testimony of Oral Witnesses.
9.1 P.W. 1 Sh Vijay Sharma Manager Investment HP State Co-operative Bank Ltd. The Mall Shimla has stated that he had joined service in the plaintiff bank in the year 1988. He has stated that he is working as Manager investment in the plaintiff bank since the year 2008. He has stated that plaintiff bank had purchased UPSFC SLR bonds from co-defendant No. 1 worth Rs. 6 crores on 14.12.2005 and had purchased bonds worth Rs. 3.50 crores on 15.12.2005 from co-defendant No. 1. He has stated that co-defendant No. 1 is liable to pay interest at the rate of 8% per annum. He has stated that co-defendant No. 1 paid interest to plaintiff bank upto February 2006 and thereafter co-defendant No. 1 did not pay any interest on the bonds due in August 2006 and February 2007. He has stated that bonds were purchased by plaintiff bank from secondary market. He has stated that plaintiff bank was entitled to recover a sum of Rs. 76 lacs from co-defendant No. 1 on account of accrued interest on the bonds. He has stated that notice Ext. P.W. 1/A was issued. He has stated that despite notice co-defendant No. 1 did not pay interest. He has stated that plaintiff bank is a Co-operative Society registered under the H.P. Co-operative Societies Act 1968. He has stated that plaintiff bank has to suffer financial loss due to non-payment of amount of interest. He has stated that co-defendant No. 1 did not pay any amount after filing the suit. P.W. 1 also tender in evidence documents Ext. P.W. 1/B to Ext. P.W. 1/G. He has admitted that head office of co-defendant No. 1 is at Kanpur U.P. He has admitted that head office of co-defendant No. 2 is at Lucknow U.P. He has admitted that bonds were issued by co-defendant No. 1 at Kanpur U.P. He has stated that bonds were not sold by co-defendant No. 1 to plaintiff bank directly. He has denied suggestion that bonds were purchased by plaintiff bank subject to market risk. He has admitted that last instalment of interest was received by plaintiff bank in February 2006. He has admitted that co-defendant No. 1 had written to plaintiff bank to accept principal amount of the bonds and waives interest. He has denied suggestion that contract between the parties stood frustrated owing to bad financial condition of co-defendant No. 1. He has denied suggestion that co-defendant No. 2 State of U.P. had not guaranteed repayment of principal amount of bonds and interest. He has denied suggestion that co-defendant No. 1 is not jointly and severally liable to pay the amount. He has denied suggestion that High Court of HP has no jurisdiction to entertain and try the present suit. He has denied suggestion that no part of cause of action accrued to plaintiff bank within territorial jurisdiction of Courts at Kanpur.
9.2. D.W. 1 R.K. Bharti has stated that he is presently posted as Assistant Grade-I in UPFC since 1989. He has stated that UPFC had floated SLR bonds in the year 1991 for a period of 20 years which were purchased by Punjab National Bank. He has stated that plaintiff bank had purchased bonds on dated 14.12.2005 for an amount of Rs. 6 crores. He has stated that thereafter plaintiff bank had purchased bonds on dated 15.12.2005 for an amount of Rs. 3.5 crores from open market. He has stated that rate of interest was 8% per annum. He has stated that interest on the bonds was payable at Kanpur. He has stated that plaintiff bank did not purchase bonds within the State of Himachal Pradesh. He has stated that no transaction took place within the territory of Himachal Pradesh. He has stated that UPFC had paid interest in the sum of Rs. 24 lacs on the bonds of Rs. 6 crores and interest of Rs. 14 lacs on the bond of Rs. 3.5 crores. He has stated that co-defendant No. 1 could not pay interest on the bond amount after March 2006 on account of its deteriorating financial status. He has stated that co-defendant No. 1 had made proposal to plaintiffs for one time settlement. He has stated that dispute between plaintiff bank and co-defendant No. 1 was to be settled only at Kanpur. He has stated that co-defendant No. 1 had already paid excess amount of interest to plaintiff bank. He has admitted that plaintiff bank had purchased SLR bonds from secondary market. He has admitted that SLR bonds floated by U.P. State Financial Corporation could be purchased from secondary market. He has admitted that SLR bonds worth Rs. 9.5 crores purchased by plaintiff bank from secondary market were fetching interest at the rate of 8% per annum. He has admitted that letter Ext. P.W. 1/B was sent by co-defendant No. 1 to plaintiff bank. He has admitted that document Ext. P.W. 1/B along with cheque to plaintiff bank was sent to Shimla address. He has admitted that another cheque amounting to Rs. 18,61,440/- vide cheque No. 149344 dated 18.3.2006 was sent to plaintiff bank at Shimla address. He has stated that aforesaid amount was paid towards interest payable to plaintiff bank on SLR bonds till February 2006. He has admitted that no interest was sent on SLR bonds which were due to plaintiff bank after March 2006. He has stated that communication was also sent to head office at Shimla. He has admitted that SLR bonds floated by U.P. State Financial Corporation were guaranteed by the Government of Utter Pradesh. He has admitted that legal notice Ext. P.W. 1/A was sent to U.P. State Financial Corporation by plaintiff bank.
9.3. D.W. 2 Sh S.K. Singh Chief Manager Law U.P. State Financial Corporation Kanpur has stated that SLR bonds were purchased by plaintiff bank from open market. He has stated that bonds purchased by plaintiff bank from open market were subject to market risk. He has stated that bonds were issued from head office of U.P State Financial Corporation situated at Kanpur. He has stated that interest on the bond amount was payable at Kanpur. He has stated that financial position of UP State Financial Corporation is deteriorating day by day. He has stated that Corporation is not in a position to pay amount more than principal amount admissible on the SLR bonds. He has stated that contract conditions has frustrated. He has stated that he has no personal knowledge that cheque bearing No. 149360 dated 28.3.2006 and cheque No. 149344 dated 18.3.2006 was sent by co-defendant No. 1 to plaintiff bank at Shimla towards payment of interest on the SLR bonds worth Rs. 9.5 crores purchased by plaintiffs. He has stated that he could not state that aforesaid cheques were credited in the plaintiff bank account No. 050010200001205 at Axis bank Kasumpti Shimla. He has admitted that interest was payable on SLR bonds twice in a year i.e. during the month of August and February. He has stated that he could not state that amount of interest which was due to plaintiff bank was Rs. 24 lacs payable on 12.8.2006 and further interest Rs. 24 lacs was payable on 12.2.2007 and further Rs. 14 lacs was payable on 31.8.2006 and further Rs. 14 lacs was payable on 28.2.2007. He has admitted that legal notice Ext. P.W. 1/A was issued. He has admitted that document Ext. P.W. 1/D was sent by co-defendant No. 1 to plaintiff bank at head office Shimla. He has admitted that documents Ext. P.W. 1/E, F and G were also sent from head office Shimla. He has stated that he could not produce any document in order to prove that U.P. State Financial Corporation is facing financial crisis. He has admitted that till filing of suit principal amount towards interest which was outstanding against U.P. State Financial Corporation was Rs. 76 lacs. He has stated that cheques were sent by co-defendant No. 1 to plaintiff bank to Shimla.
9.4 PW2 Sh Abhishek Chauhan in rebuttal has stated that current account No. 050010200001205 is in the name of H.P. State Co-operative Bank The Mall Shimla. He has stated that earlier Axis bank was known as UTI bank. He has stated that on dated 24.4.2008 UTI bank has changed its designation as Axis bank. He has stated that statement of account is Ext. PW2/B. He has stated that transaction relating to cheque No. 149344 amounting to Rs. 1861440/- is marked as mark ''x''. He has stated that similarly entry in respect of transaction of cheque No. 149360 amounting to Rs. 1085840/- is encircled in red and marked as mark ''Y'' in Ext. PW2/B. He has stated that he has not incorporated the entries in the ledger account of plaintiff bank.
Findings upon Issue No. 1.
10. Submission of learned Advocate appearing behalf of plaintiffs that plaintiffs are legally entitled for recovery of Rs. 90,67,466/- is partly answered in yes and partly in no for the reasons hereinafter mentioned. It is proved on record that on dated 14.12.2005 plaintiff bank purchased SLR bonds to the tune of Rs. 6 crores. It is proved on record that plaintiff bank had purchased SLR bonds to the tune of Rs. 3.5 crores on dated 15.12.2005. It is proved on record that plaintiff bank purchased SLR bonds to the tune of Rs. 9500000/- (Nine crores fifty lacs). It is proved on record that SLR bonds were issued by U.P Financial Corporation and was guaranteed by the Government of Utter Pradesh. It is also proved on record that as per bonds the interest was to be payable by way of equal half yearly payments in the month of August and February every year. It is proved on record that SLR bonds were transferable. It is proved on record that rate of interest was 11.5% which was reduced to 8% per annum. It is proved on record that vide document Ext. P.W. 1/G dated 12.2.2008 plaintiffs bank issued notice to co-defendant No. 1 to pay interest due to the tune of Rs. 76 lacs. D.W. 1 R.K. Bharti Assistant Grade-I UPFC Kanpur has admitted in cross examination that sum of Rs. 76 lacs was due to plaintiffs bank against co-defendant No. 1 as interest amount. Even D.W. 2 S.K. Singh Chief Manager Law UP State Financial Corporation Kanpur has admitted that initially the rate of interest was 11.5% per annum which was reduced to 8% per annum. D.W. 2 S.K. Singh Chief Manager Law UP State Financial Corporation has admitted that at the time of filing of suit the principal amount towards interest which was outstanding against UP State Financial Corporation was Rs. 76 lacs. It is well settled law that facts admitted not to be proved under Section 58 of the Indian Evidence Act. In the present case D.W. 1 R.K. Bharti and D.W. 2 S.K. Singh have admitted the liability of Rs. 76 lacs relating to interest at the time of filing of the suit. Even plaintiffs in para 4 of the plaint has specifically mentioned in positive manner that interest to the tune of Rs. 76 lacs is due to plaintiffs bank from defendants jointly and severally. D.W. 1 R.K. Bharti has specifically stated when he appeared in witness box that plaintiffs have sold the bonds to CKP Cooperative bank Limited Mumbai to the tune of Rs. 6 crores. D.W. 1 R.K. Bharti has specifically stated when he appeared in witness box that plaintiffs bank has sold bonds to the tune of Rs. 3.5 crores to Ajmer Urban Cooperative Bank Limited Ajmer. Plaintiffs bank did not adduce any rebuttal evidence on record in order to prove that plaintiffs bank did not sale bonds to CKF cooperative bank Bombay and to Ajmer Urban Co-operatives Bank Ltd. Ajmer. In the present case no specific date has been mentioned that on which date SLR bonds were sold by plaintiffs bank to CKP Co-operative Bank Limited Mumbai and to Ajmer Urban Cooperative Bank Limited Ajmer. Court is of the opinion that after the sale of SLR bonds to CKP Cooperative Bank Mumbai and to Ajmer Urban Cooperative Bank Limited Ajmer plaintiffs bank is not legally entitled for claim of interest after the sale of bonds. D.W. 1 R.K. Bharti Assistant Grade-I UPFC Kanpur has specifically stated in positive manner when he appeared in witness box that one time settlement has been executed by co-defendant No. 1 with CKP Cooperative Bank Limited Mumbai and with Ajmer Urban Cooperative Bank Limited Ajmer relating to Rs. 6 crores SLR bonds and relating to Rs. 3.5 crores SLR bonds which are in dispute. Plaintiffs did not adduce any rebuttal evidence on record. In view of the fact that plaintiff bank already sold SLR bonds to CKP Cooperative Bank Limited Mumbai to the tune of Rs. 6 crores and in view of the fact that plaintiff bank also sold SLR bonds to Ajmer Cooperative Bank Limited Ajmer to the tune of Rs. 3.5 crores and in view of fact that as per Section 3(3)(c) of Interest Act 1978 Court is not empowered to award interest upon interest it is held that plaintiffs are not entitled for interest upon interest. It was held in case reported in
Findings upon issue No. 2.
11. Submission of learned Advocate appearing on behalf of defendants that suit is not maintainable on purchase of bond is rejected being devoid of any force for the reasons hereinafter mentioned. It is proved on record that plaintiffs have purchased SLR bonds. It is proved on record that as per condition mentioned in SLR bonds same were transferable by endorsement. It is held that plaintiffs being purchaser of SLR bonds issued by co-defendant No. 1 are legally entitled to file suit for recovery of interest due. Hence issue No. 2 is decided against defendants.
Findings upon issue No. 3.
12. Submission of learned Advocate appearing on behalf of defendants that plaintiffs have no locus standi to file and maintain the present suit is rejected being devoid of any force for the reasons hereinafter mentioned. It is proved on record that plaintiffs bank had purchased SLR bonds to the tune of Rs. 9.5 crores. It is proved on record that SLR bonds were transferable. It is proved on record as per testimony of D.W. 1 R.K. Bharti that co-defendant No. 1 had sent interest amount to the plaintiffs. In view of the fact that defendants have given undertaking in SLR bonds that they would pay interest at the rate of 11.5% per annum which was later reduced to 8% per annum and in view of the fact that SLR bonds are transferable bonds as per recital mentioned in SLR bonds it is held that plaintiffs bank who had purchased SLR bonds is legally entitled to claim interest from defendants jointly and severally because co-defendant No. 2 had stood guarantor of U.P State Financial Corporation who had issued SLR bonds. Hence it is held that plaintiffs have locus standi to file and maintain present suit. Issue No. 3 is decided against defendants.
Findings upon issue No. 4.
13. Submission of learned Advocate appearing on behalf of defendants that Hon''ble High Court of HP has no territorial jurisdiction to try present suit in view of condition in SLR bonds that interest would be payable at U.P Financial Corporation Kanpur is also rejected being devoid of any force for the reasons hereinafter mentioned. It is well settled law that territorial jurisdiction of Court is granted by statute. It is well settled law that territorial jurisdiction of Court cannot be snatched by parties by way of self agreement. It is well settled law that any agreement which is contrary to statutory law cannot be enforced in Court of law. In the present case it is proved on record that co-defendant No. 1 has sent amount of interest to plaintiffs bank to Shimla and the amount mentioned in the cheque was deposited in payee account of plaintiffs bank. It is proved on record by way of testimony of PW2 Abhishek Chauhan who is posted in Axis bank S.D. Complex Kasumpati Shimla HP that co-defendant No. 1 had sent cheque No. 149344 amounting to Rs. 1861440/- in favour of plaintiffs bank. It is proved on record that co-defendant No. 1 had also sent interest amount vide cheque No. 149360 amounting to Rs. 1085840/- in favour of plaintiffs bank to Shimla which was credited in the payee account of plaintiffs bank by Axis Bank S.D. Complex Kasumpati Shimla HP. It is well settled law that suit can be filed where the defendants resides or where part of cause of action accrued. In view of the fact that co-defendant No. 1 had sent two cheques relating to interest to Shimla and in view of fact that amount of the cheque was credited in the payee account of plaintiffs bank at Shimla HP it is held that part of cause of action accrued in favour of plaintiffs at Shimla which is within territorial jurisdiction of High Court of HP. It is well settled law that civil suit can be filed where part of cause action accrued in favour of plaintiffs as per Section 20(c) of Code of Civil Procedure 1908. It is held that in the present case part of cause of action accrued in favour of plaintiffs at Shimla H.P. It is held that plaintiffs bank is legally competent to file present suit in High Court of HP. Hence issue No. 4 is decided against defendants.
Findings upon issue No. 5.
14. Submission of learned Advocate appearing on behalf of defendants that contract has become frustrated on account of financial crisis of co-defendant No. 1 and on this ground suit filed by plaintiffs be dismissed is rejected being devoid of any force for the reasons hereinafter mentioned. It is proved on record that co-defendant No. 1 did not file balance sheet of financial status of co-defendant No. 1. There is no evidence on record that co-defendant No. 1 was declared bankrupted by competent Court of law. Court is of the opinion that simply on the testimony of D.W. 1 and D.W. 2 that co-defendant No. 1 is suffering from financial crisis it is not expedient in the ends of justice to decline relief to the plaintiffs. Hence it is held that present contract has not become frustrated on account of subsequent events. Issue No. 5 is decided against defendants.
Findings upon issue No. 6.
15. Another submission of learned Advocate appearing on behalf of defendants that present suit has not been filed through a competent and authorized person is also rejected being devoid of any force for the reasons hereinafter mentioned. Defendants did not adduce any positive, cogent and reliable evidence on record in order to prove that present suit was not filed by competent person. Defendants did not examine any official of plaintiffs in order to prove that Sh Rajinder Singh Managing Director of plaintiff bank was not authorized to file present suit. Hence issue No. 6 is decided against defendants on the concept of ipse dixit (Assertion made by person without proof). Issue No. 6 is decided against defendants.
Findings upon issue No. 7.
16. Another submission of learned Advocate appearing on behalf of defendants that present suit barred under the provision of Recovery of Debt due to Banks and Financial Institutions Act 1993 is also rejected being devoid of any force for the reasons hereinafter mentioned. Plaintiffs have specifically mentioned in para No. 1 of the plaint that plaintiff bank is constituted under the provision of HP cooperative societies act. It was held in case reported in
Findings upon issue No. 8.
17. Submission of learned Advocate appearing on behalf of defendants that suit is not within time is also rejected being devoid of any force for the reasons hereinafter mentioned. It is proved on record that document Ext. P.W. 1/G dated 12.2.2008 issued by HPSC Bank Ltd. to General Manager UPFC head office 14/88 Civil Lines Kanpur UP. Plaintiffs bank issued demand notice to co-defendant No. 1 for payments of Rs. 76 lacs but despite demand notice Ext. P.W. 1/G issued on dated 12.2.2008, defendants did not pay amount of interest due to the tune of Rs. 76 lacs. Present suit was filed by plaintiffs on 7th April, 2009. Hence it is held that present suit is within limitation from accrual of cause of action. It is proved on record that vide letter Ext. P.W. 1/D dated 12th November 2006 co-defendant No. 1 proposed plaintiffs for settlement to accept full principal amount without interest which was worked out to Rs. 9.5 crores. On 12th November 2006 UPFC had agreed to release entire principal amount in twelve equal monthly installment commencing from April 2007. It is proved on record that vide letter Ext. P.W. 1/D dated 12th November 2006 co-defendant No. 1 acknowledged the liability to pay an amount to the tune of Rs. 9.5 crores. It is well settled law that by way of written acknowledgement limitation could be extended under Section 18 of Limitation Act 1963. Present suit was filed on 7th April, 2009 within three years w.e.f. 12th November 2006. It is held that present suit was filed within limitation. Issue No. 8 is decided against defendants.
Relief:
18. In view of above stated findings suit is partly decreed in favour of plaintiffs and against defendants jointly and severally for recovery of Rs. 76,00,000/- (Seventy six lacs) with costs. Interest upon interest is declined. Registrar Judicial will prepare decree sheet forthwith in accordance with law. Civil suit is disposed of. All pending application(s) if any are also disposed of.
