NATIONAL JUDGEMENT WRITING COMPETITION, 2023

TC- RARA01

IN THE COURT OF MR XYZ, NASHIK

Civil Petition No: 146/2023

Date of decision: 26.04.2023

BRANCH MANAGER, ABC BANK…………………………… Plaintiff

VERSUS
Mr. X & Ors. ………………………………… Respondent

CORUM: Ms. Sarita Siwach , Learned Judicial Magistrate 1st class, Panipat

PRESENT: Mr. Abhishek Yadav, Advocate for the plaintiff- ABC Bank

Mr. Naresh Sood, Advocate for the defendent No.1

Mr. Abhinav Sood, Senior Advocate for defendants No. 2 and 3

*****

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JUDGEMENT:

INTRODUCTION

NATURE OF THE CASE

The aforementioned matter is a suit for recovery filed by the Plaintiff Bank which has insti-
tuted this suit through its Branch Manager for recovery of Rs. 3,54,937/- (Rupees three lakh
fifty four thousand nine hundred thirty seven only) along with 10% p.a interest and notice
charges against the defendants.

FACTS OF THE CASE

1) The case pertains to the suit for recovery instituted by the plaintiff ABC Bank for the
recovery of the loan amount of Rs. 10,00,000/- ( Rupees Ten Lacs only ) advanced
to defendant no. 1- X, who was an agriculturist, on the guarantee of Defendant no. 2-
Y and defendant no. 3- Z. The instant suit has been instituted before the court by the
plaintiff- ABC Bank, through its authorized representative i.e. Branch Manager of
the bank.

2) The Defendant No.1-X had approached the Plaintiff for grant of a loan for purchase
of a tractor and a trolley. The Plaintiff Bank acceded to the request of Defendant No.
1 and sanctioned him the required loan. The relevant particulars of the credit facility
sanctioned by the plaintiff Bank to defendant no. 1 are listed as under:

Date of Loan Application No. 25.11.2006

Date of execution of documents 25.11.2006

Amount of Loan 10,00,000/-

Rate of Interest 10% p.a.

Equated Monthly Installment (EMI) 32,267/-

Number of EMIs 36

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Date of Commencement 25.11.2006

3) In the processing of the loan amount of Rs. 10,00,000 (Rupees Ten Lacs only), various
documents were executed in order to suffice as for a valuable consideration which are
included as under-

 Loan Agreement dated 25.11.2006 (Ex-P3)

 A Deed of Hypothecation executed by D1 (Ex-P4)

 A Deed of Guarantee executed by D2 and D3 (Ex-P5)

4) The Defendant No.1- Mr. X continued to make the payment of the Easy Monthly
Instalments (EMIs) regularly and later, defaulted in repayment of the same in the sec-
ond year and therefore, the plaintiff bank issued a notice to the defendant no. 1- Mr.
X on 25.12.2008 for recalling back the loan, where the defendants were called upon
to pay the entire outstanding amount along-with interest and notice charges within a
period of one month. Despite being duly notified about the same, and after having
received a notice to comply, the Defendants did not come forward to pay the out-
standing amount constraining the plaintiff to institute the instant suit.

5) The Plaintiff has prayed that the suit be decreed in the sum of Rs. 3,54,937/- ( Rupees
three lakh fifty four thousand nine hundred thirty seven only) with interest @ 10%
per annum w.e.f. 25.12.2008 till the realization of the amount. Furthermore, the
charges borne by the plaintiffs for the delivery of the notice and the cost of the insti-
tution of the suit have also been prayed for.

JURISDICTION

6) The present petition is presented within the local limits of the ordinary original com-
mercial jurisdiction of the Hon'ble Court and therefore, is very much within the ambit
of section 6 of The Commercial Courts Act, 2015 and hence, maintainable.

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ARGUMENTS ADVANCED BY ABC BANK (PLAINTIFF)

7) The legal representative for ABC Bank, the plaintiff in this case, informed the court
that they had lent Mr. X, an agriculturist, Rs. 10,00,000/- to purchase a tractor and
trolley. To secure the loan, a loan agreement and a deed of hypothecation of the tractor
were signed. Defendants No. 2 and No. 3, Mr. Y and Mr. Z, respectively, signed a
deed of guarantee agreeing to repay the loan with 36 monthly installments with a 10%
annual interest rate.

8) The representative further stated that Mr. X failed to pay the monthly installments
during the second year of the loan. Despite receiving a loan recall notice from ABC
Bank on 25.12.2008, the defendants did not comply. Additionally, guarantors Mr. Y
and Mr. Z also did not fulfill their contractual obligations.

9) The counsels appearing on behalf of the plaintiff bank produced on record the copy
of the Power of Attorney (Ex. P-1), a copy of resolution by the bank appointing the
branch manager to institute the suit ( Ex. P-2 ), the loan agreement entered to in be-
tween the plaintiff bank and Mr. X ( Ex. P-3 ), a deed of hypothecation executed by
D1 ( Ex. P-4 ), a deed of guarantee as instituted by D2 and D3 ( Ex. P-5 ), and a copy
of the notice recalling the loan dated 25.12.2008 (Ex. P-6).

ARGUMENTS ADVANCED BY THE COUNSEL FOR THE DEFENDANTS

10) During the course of presenting the defendant's case, the counsel representing De-
fendant No. 1, Mr. X, Defendant No. 2, Mr. Y, and Defendant No. 3, Mr. Z, argued
that the Branch Manager of ABC Bank lacked the authority to file the present suit
and, as such, the suit brought by the Branch Manager is not legally sustainable be-
fore the Hon'ble Court.
11. The counsel for the defendants further contended that the plaintiff bank acquired signatures
from the defendants on unspecified forms, the contents of which were not explained to the
defendants. The counsel also alleged that the terms of the loan agreement were not agreed to
by the defendants.

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12. Additionally, the defendants' counsel maintained that the loan amount of Rs. 10,00,000 with
an interest rate of 10% per annum was supposed to be repaid by Defendant No. 1, Mr. X, after
a period of 36 months. It was brought to the court's attention that Mr. X had only defaulted on
a single payment after a period of 2 years and 1 month. Despite the plaintiff bank issuing a
notice in this regard, Defendant No. 1 was obliged to pay the entire outstanding amount, along
with interest charges and the charges of the notice. It is respectfully submitted that, in the
interest of justice, fairness, and good conscience, such a minor default in payments should be
overlooked, and Mr. X should be given additional time to repay the loan amount.

POINTS OF DETERMINATION

13. I have heard the counsels for both the parties- ABC Bank and Mr. X and perused all the rele-
vant document that have put forward before the court as record and the following issues crop
up in the present case which require the determination of the Court-

A. Whether or not the Branch manager of the plaintiff has no authority to file the
instant suit?
B. Whether or not the plaintiff bank is entitled for recovery of the loan amount along
with interest and notice charges from the defendants?

RATIO DECIDENDI

And don't speak too soon,

for the wheel's still in spin

And there's no telling

who that it's naming,

For the loser now

will be later to win.

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DECIDING UPON THE FIRST ISSUE

14. Having listened to the arguments of the plaintiff's counsel, representing ABC Bank, and the
defendants, Mr. X, Mr. Y, and Mr. Z, it is undisputed that Defendant no. 1, Mr. X, received a
loan of Rs. 10,00,000/- (Rupees Ten Lacs only) for the purchase of a tractor and trolley. De-
fendants no. 2 and 3 were the guarantors of the loan, which was to be repaid in equated
monthly instalments over a period of 36 months. However, Mr. X defaulted in the second year,
leading to the plaintiff issuing a notice on 25.12.2008 to recall the loan, along with the interest
and notice charges. As the defendants failed to comply with the notice, the plaintiff bank filed
a suit against them.

15. The counsel for the plaintiff- ABC Bank argued that the matter in question is a com-
mercial dispute, as defined by section 2(c)(i) and other applicable provisions of the
Commercial Courts Act, 2015. They cited the case of State Bank of India vs. Mr.
Afroz Khan, CS ( Commercial) No. 2477/2019, where the defendants had requested
and received a loan from the plaintiff bank. However, they defaulted on the monthly
instalments, despite the plaintiff bank's attempts to recover the amount. The Hon'ble
Tis Hizari Court had held that the plaintiff was entitled to the suit amount claimed with
simple interest @ 9.70 percent from the date of institution of the suit till the date of
passing of this judgement. The counsel argued that in the current case, the plaintiff
bank is entitled to recover the amount from the defendants.

16. The counsel on behalf of the defendant- Mr. X stated to the acquaintance of the Hon'ble
Court that the plaintiffs are not entitled to recover any money in the instant suit as the
plaintiff bank had obtained signatures on some forms, without explaining the contents
of the same, and also, the branch manager, who is the plaintiff in the instant suit, is not
entitled to file the instant suit as he is not authorized to file the suit.

17. In response to the argument put forth by the defendant's counsel, the plaintiff's counsel
referred to the judgement in the case of State Bank of India vs. Kashmir Art Print-
ing Press, AIR 1981 P&H 188, where the Hon'ble Court had observed that in such
commercial matters, larger authority is granted to the Branch Manager to sign the
plaints, written statements, petitions, applications, and all other documents connected
with the legal proceedings, including filing suits. Therefore, the Branch Manager is a
competent and authorized party to file the instant suit.

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18. The counsel on behalf of the plaintiffs further sought reference to the judgement of the
Hon'ble Court in the case of Umesh Chandra Misra vs. State Bank of India, AIR
1987 Ori 67, where it was held that a decree filed by the Branch manager is not a
utility and therefore, he is a competent authority to file the suit.

19. After hearing both parties, the Bench concluded that the Branch Manager of the plain-
tiff bank had the complete authority to file the instant suit on behalf of the bank. There-
fore, the argument raised by the defendant's counsel regarding the inadmissibility of
the suit on the grounds that the plaintiff is not authorized to file the instant suit is
rejected.

WITH REGARDS TO ISSUE 2

20. In regards the second issue, the counsel on behalf of the plaintiff ABC Bank, drew the attention
of the Hon'ble Court to Section 74 of the Indian Contract Act, 1872, which reads as under-
Compensation for breach of contract where penalty stipulated for:- When a contract has
been broken, if a sum is named in the contract as the amount to be paid in case of such
breach, or if the contract contains any other stipulation by way of penalty, the party
complaining of the breach is entitled, whether or not actual damage or loss is proved to
have been caused thereby, to receive from the party who has broken the contract rea-
sonable compensation not exceeding the amount so named or, as the case may be, the
penalty stipulated for.

21. The plaintiff's lawyer argued that the defendant breached the contract in this case and
that there was a pre-agreed sum that the defendant would have to pay in case of such
a breach. Therefore, the defendant must pay the agreed amount to the plaintiff bank.

22. The plaintiff's lawyer also referred to Section 70 of the Indian Contract Act, 1872,
which says that when someone does something for another person, and that person
gains a benefit from it, the beneficiary is obligated to compensate the person who did
the task or delivered something. The plaintiff's lawyer argued that the defendant has
an obligation to repay the loan to the plaintiff bank as the loan was not provided for
free

23. The defendant's lawyer refuted the allegations and claimed that the contract had not
been breached yet, as the loan was to be repaid within three years. The lawyer further
stated that the contents of the form that made the defendants liable were not known to

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them, and therefore, no contract could exist because there was no question of any free
consent.

24. The counsel on behalf of the plaintiff, in reply to the argument raised by the counsel
for the defendant, placed reliance on the judgement of State Bank of India vs. Mr.
Afroz Khan, CS ( Commercial) No. 2477/2019, where it was held by the Hon'ble
Court that the defendant is liable to the plaintiff for breach of contract, when there is
a contractual obligation on the parties to pay, and they have defaulted upon the same,
and therefore, in the instant case, the defendant no. 1- Mr. X, has miserably failed to
fulfill his contractual obligation and despite having received the notice from the plain-
tiff bank for recalling of the loan, failed to comply with such terms and therefore,
committed breach of contract.

25. The defendant's lawyer stated that for a contract of guarantee to exist, several conditions
must be met, such as an agreement between all three parties, a valid consideration under sec-
tion 127 of the Indian Contract Act, 1872, the existence of a debt, and the agreement ful-
filling all the requirements of a valid contract. The creditor must also disclose to the surety all
the facts that may affect their liability.

26. The defendant's lawyer argued that the contract of guarantee's essential attribute is not
fulfilled as there is no valid consideration in this case, and therefore, the agreement cannot be
considered a contract of guarantee, and no obligation arises for the defendants.

27. The Counsel appearing on behalf of the plaintiff, sought reference to the judgement in the
case of State Bank of India vs. Premco Saw Mill, AIR 1984 Guj 93, where it was held that
the patience and acceptance on the part of the bank constituted a good consideration for the
surety, and therefore, there was no requirement of any other consideration. The counsel con-
tended that similarly, in the instant matter, the patience and acceptance on the part of the
plaintiff- ABC Bank constituted a valid consideration and there was no question of non-ful-
filment of the requirement of consideration.

28. The counsel on the behalf of the defendants contended before the Hon'ble Bench, that the
bank officials have been constantly harrassing the defendants for recovering the remaining
amount and therefore, relied upon the judgement in the case of ICICI Bank vs. Shanta Devi

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Prasad, SLP (Crl.) No. 4935 of 2006, where it was held by the Hon'ble Supreme Court that
it was necessary to remind the banks and other financial organizations that we live in a social-
ized country and are administered by the standard of law. The court held that the Bank and its
musclemen liable for abetting a person to commit suicide by threatening him.

29. The counsel further contended that in the case of ICICI Bank Ltd, v. Prakash Kaur and
Ors. (2007), a loan was taken by the Petitioner in order to purchase a car and certain defaults
were committed by him in repayment. As a consequence of this, the vehicle with the Petitioner
was taken away from the Petitioner by force through employing musclemen. The Court, in
this case, gave the ling that neither force can be utilized nor musclemen or hooligans can be
hired by a private or nationalized bank in order to recover the amount of a loan.

30. The counsel also relied on the judgement given by the Kerala High court in the case of
Smart Security Secret Service Agency v. SBI (2016), it was ruled that the utilisation of
musclemen for the recovery of a due amount would lead to lawlessness in a democratic coun-
try like India. Therefore, it was eld that the application of solid arm strategies in order to
recover credit by a bank or financial institution is opposed to public policy and therefore, is
unlawful. The financial institutions were guided to follow the due process of law in an author-
ised way.

31. The counsel on the behalf of the plaintiff, stated that, in the instant case, no bank officials
were sent to the house of the defendants, and therefore, refuted the relevance of the judgement
cited by the counsel for the defendants in this regard, and stated that only a notice was sent on
behalf of the Bank Authorities to the defendants, and therefore, as such no liability arises in
the instant case, for such notice.

32. The Bench after hearing the counsels for both the parties, has come to the conclusion that
the harassment, as acclaimed by the defendants cannot be considered per se, and it would be
caused only upon the commitment of certain acts, and merely sending updates and demands
for instalment does not fall within the criteria of harassment. Further, the grant of loan by the
bank cannot be considered as a gratuitous act, and therefore, the defendants under sections 70
and 74 of the Indian Contract Act, 1872, are liable to restore back the benefits back to the
defendants.

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VERDICT

33. The plaintiff has won the case and is entitled to receive Rs. 3,54,937/- (Rupees three lakh
fifty-four thousand nine hundred thirty-seven only) with interest of 10% per year from the
date the case was filed until the entire amount is paid. The interest accrued during this period
will be added to the principal amount. The plaintiff must pay any additional court fees required

34. The plaintiff is therefore entitled to the suit amount claimed with interest @ 10% from the
date of institution of suit till the date of passing of this judgement.

35. In compliance of the provisions of the Order XX Rule 1 of the Code of Civil Procedure
(as amended up to date by the Commercial Courts Act, 2015) a copy of this judgement be
issued to all the parties to the dispute through electronic mail, if the particulars of the same
have been furnished, or otherwise. This judgement be also be uploaded on the website of the
Court of Nashik.

PRONOUNCED IN OPEN COURT

Pronounced:- ` Sd/-

26.04.2023 Ms. Sarita Siwach

Sessions Judge, Nashik

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