Disposed

Dena Bank v. Nilesh Karunakar Shetty and 3 Ors.

Bombay HC24 Aug 2012SJ/51/2011

Case brief

AI extract

What is this about?

In a summary suit for recovery of loan amounts, the court addressed a defense claiming the suit was time-barred and alleging fraud by a third-party training provider. Finding a substantial defense raised regarding limitation and potential collusion, the court granted leave to defend.

What did the court decide?

Unconditional leave to defendants to defend; written statement to be filed within eight weeks; suit transferred to commercial cause list.

Dena Bank Vs Nilesh Karunakar Shetty and 3… — Contract and Commercial Disputes | Bombay HC (2012)

S.J. No. 51 of 2011

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IN THE HIGH COURT OF JUDICATURE AT BOMBAY

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ORDINARY ORIGINAL CIVIL JURISDICTION

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SUMMONS FOR JUDGMENT NO. 51 OF 2011 IN

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SUMMARY SUIT NO. 2387 OF 2010

Dena Bank

… Plaintiff

Versus

Nilesh Karunakar Shetty and Ors. … Defendants

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Mr. K.D. Shukla i/by M/s. K.D. Shukla & Co. for Plaintiff.

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Mr. M.V. Sawant with Smt. Sunita J. Kalwar for Defendant Nos. 1 to 3.

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CORAM : R.D. DHANUKA,JJ. DATED : AUGUST 24, 2012

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ORAL JUDGMENET :

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By this judgment, the plaintiff seeks to recover sum of Rs.4,65,768.94 with interest and cost. The suit has been filed on the basis of promissory note, loan agreement, letter of lien and letter of guarantee filed by the defendant nos. 1 to 3. The defendant no. 4 has been joined as formal party. No relief has been claimed against the 4^th defendant.

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According to plaintiff, defendant no. 1 who is son of defendant no. 2 wanted to secure admission for G.P. Rating Cadet Course 51 months with International Maritime Academy, Chennai and applied for a loan of Rs.3,51,000/-. Defendant no. 2 was co-borrower. Defendant no. 3 is sued as guarantor. Defendant no. 4 is training provider company. According to plaintiff on the defendant nos. 1

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S.J. No. 51 of 2011

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to 3 executing various documents in respect of education loan, the plaintiff sanctioned loan of Rs.3,51,000/- in favour of first defendant. According to plaintiff, fourth defendant by its letter dated 12^th October, 2004 addressed to the plaintiff bank introduced themselves as one of the leading consultants for Merchant Navy in India for over five years. By the said letter the fourth defendant guaranteed sponsorship for the students for 36 months on board ship training. It was mentioned that total fees charged for the said training was Rs.3,61,000/-. It was mentioned that the stipend to be earned by the students during 36 months ranges from 600 $ to 1000 $.

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The Plaintiff by Advocates Notice dated 2^nd November 2006 and 15^th July, 2008 called upon defendant nos.1 to 3 to pay Rs.4,28,219/-. In the said notice, it is admitted that the Bank had disbursed the said amount directly to fourth defendant as the fourth defendant was sponsorer having represented to the bank for granting the said loan to defendant nos. 1 to 3. By the said notice the plaintiff finally called upon the defendants to pay Rs.4,28,219/- under the said education loan to the plaintiff. The defendant nos. 1 to 3 by their advocates letter dated 4^th December, 2006 informed the plaintiff that no amount was due and payable by defendant nos.1 to 3 to the plaintiff. The defendants also requested the plaintiff to initiate criminal action against fourth defendant and also staff of the plaintiff bank who were responsible for sanction of the said loan without looking into the credibility of the fourth defendant.

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By Advocate's notice dated 1^st February, 2007 the plaintiff bank reiterated

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S.J. No. 51 of 2011

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its claim and demanded the amount from defendant nos. 1 to 3.

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There is delay in filing affidavit in reply on behalf of defendant nos. 1 to 3. In para 33 of the affidavit in reply dated 23^rd January, 2012, the Defendants have sufficiently explained the delay in filing the reply. Explanation is accepted. Delay in filing the affidavit in reply is condoned. Affidavit is taken on record.

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The learned counsel for the plaintiff submits as under :

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The suit is based on the promissory note as well as documents admittedly executed by and between the plaintiff and defendant nos. 1 to 3. The defendant No. 1 has availed of the loan facility and has not repaid the same to the plaintiff.

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On the other hand, the learned counsel for the defendants submits as under :

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(i) The suit is barred by law of limitation. It is submitted that the plaintiff had raised its final demand by letter dated 2^nd November, 2006 which was denied by defendant nos.1 to 3 on 4^th December, 2006. The cause of action had thus arisen on the denial of the claim by the defendants. The Plaintiff has filed the suit on 3^rd July, 2007. It is submitted that the suit is on the face of it barred by law of limitation.

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(ii) There is collusion between the fourth defendant and the officers

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of the plaintiff. In support of this plea, the learned counsel relied upon the letter dated 12^th October, 2004 addressed by the fourth defendant to the plaintiff bank in which the 4^th defendant had introduced itself as one of the leading consultants in Merchant Navy and had canvassed

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S.J. No. 51 of 2011

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that the students taking admission with the fourth defendant be

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granted education loan who would be able to repay such loan by earning substantial amount of stipend. The reliance is also placed on letter dated 18^th October, 2004 addressed by the fourth defendant to the plaintiff bank referring the name of the plaintiff bank for education loan and requesting the bank to consider the application of the said defendant for education loan. By letter dated 1^st November, 2004 the plaintiff bank sanctioned an amount of Rs.3.61 lacs. to the first defendant on the terms and conditions appended thereto. Clause 4 provided that the term loan be repaid in 36 Equal Monthly Installments of Rs.11,533/- commencing from December, 2005 i.e. one year after completion of training at Mumbai and Chennai when the stipend will be earned by the cadets.

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(iii) The fourth defendant had committed fraud in collusion with the officers of the plaintiff bank. At least ten students who were affected by such fraud had lodged complaint with the Deputy Chief Minister and Home Minister on 29^th September, 2006 for intervention in the matter. Reliance is placed on the letter addressed by the Senior Inspector of Police, EOW (Exh. M to affidavit in reply) addressed to the Branch Manager of Dena Bank and issuing summons under section 91 of the Criminal Procedure Code to produce documents. In the said letter, it is categorically reported that the Director of the fourth defendant used to visit the plaintiff bank to sanction the education loan

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S.J. No. 51 of 2011

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to the students who wanted to get admission in the said institution. The fourth defendant was having account with the plaintiff bank in the name of the institution. It is further recorded that the fourth defendant had received Rs. 4 lacs. per students but did not impart training and had cheated the students. The said offence has been registered by the Economic Offences Wing.

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After perusing the records produced by both the parties, it is clear that on the request of the fourth defendant institution to the bank and on indemnity and assurance that if the students were admitted by the fourth defendant and were granted education loan, such students would be imparted training and the substantial amount of stipend would be paid to them and the education loan granted to such students would be secured. The record produced by the parties indicate that no training has been imparted by the fourth defendant to the 1^st defendant and several other students nor any stipend has been paid. Offence has been registered against the 4^th defendant. Criminal proceedings are pending.

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In so far as issue of limitation raised by the defendant is concerned, it is clear that the plaintiff had raised its final demand by letter dated 2^nd November, 2006. The defendant had denied the claim of the plaintiff by letter dated 4^th December, 2006. The cause of action had thus arisen. I do not find any substance in the plea raised by the learned counsel for the plaintiff that as the repayment was to be made in 36 installments, the cause of action would commence only on expiry period of last installment. The cause of action had already arisen even

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S.J. No. 51 of 2011

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before the plaintiff raised its demand and in any case not later than the claim having been denied by the defendants. Once cause of action had arisen, it did not stop subsequently. Once limitation has begun to run upon the accrual of cause of action, it would run continuously and it ceases to run when the party commences legal proceedings in respect of cause of action in question. Plaintiff had already raised final demand on 2^nd November, 2006 after amount was due according to the plaintiff. In my view, defendants have raised triable issue that claim made by the plaintiff is time barred. In my view there is substantial defence raised by the defendants which can be considered only at the trial of the suit. In my view, the record indicates that the Plaintiff bank would not have granted loan simplicitor to the first defendant independently unless the fourth defendant would have taken lead role in availing the said loan facility from the plaintiff bank. I therefore, pass the following order :

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(a) Unconditional leave is granted to the defendant Nos. 1 to 3 to defend the suit.

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(b) Written statement shall be filed within eight weeks from today.

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(d) Summons for Judgment is accordingly disposed of.

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(e) There shall be no order as to costs.

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(R.D. DHANUKA,J.)

Dena Bank v. Nilesh Karunakar Shetty and 3 Ors.

Case brief

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Dena Bank v. Nilesh Karunakar Shetty and 3 Ors.

Case brief

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