Appeal against a decree dismissing a suit for recovery on promissory notes. The appellate court affirmed the lower court's finding that no full loan was disbursed and renewal notes were invalid due to the society's defunct status, dismissing the appeal against both borrowers and guarantor.
The appeal suit is dismissed with no costs.
This page shows the compact analysis of this judgement. The full analysis — procedural history, issue-by-issue holdings with ratio and obiter, advocates, and paragraph-level evidence for every claim — is being added to the record in batches and will appear here when this judgement has been through it.
THE HON’BLE SRI JUSTICE N.R.L.NAGESWARA RAO APPEAL SUIT No. 2054 of 1993
JUDGMENT:
The appeal is filed against the judgment in O.S.No.5 of 1987 on the file of the Subordinate Judge, Srikalahasti. The suit was one filed for recovery of Rs.34,218-45 ps. and due on a promissory note executed by defendants 3 to 6 and another and for interest and costs.
The allegations in the plaint go to show that the 1st defendant is a cooperative society formed in the year 1975 for the benefit of farmers collective forming at Gazalapellore. The purpose is to acquire lands for agriculture and to take steps for increased agricultural production. One K.Venkatasubbachari was the president and the defendants 3 to 6 are the directors and when they approached the plaintiff bank in 1976 for a loan of Rs.1,70,000/- for digging of borewells and for installation of motors, etc., 80% of the loan was sanctioned with regular conditions payable in installments. The 7th defendant executed a guarantee deed. On the basis of the guarantee deed and also the demand promissory note by defendants 3 to 6 and Venkatasubbachari a sum of Rs.40,800/was paid and the promissory notes were renewed and the business was closed by 06.09.1986 and by which date a sum of Rs.33,101-30 ps. was due. Earlier the debt was renewed on 22.11.1980 on 15.10.1983.
The 2nd defendant is the chairman of the 1st defendant. Defendants 3 to 6 remained ex parte and the 2nd defendant filed a written statement, which was adopted by the 7th defendant contending that the suit is not maintainable and the agreement executed by 7th defendant is only supplementary one and neither sanctioned amount was kept in the plaintiff bank and except a sum of Rs.5,000/- and Rs.1,495-70 have withdrawn in different dates and that amounts were lying with the plaintiff bank. The plaintiff bank without any approval from the president adjusted
the said amount. The interest is not proper. Since 1983 the society was defunct and, therefore, the renewal promissory notes are not valid. On 02.09.1996 a sum of Rs.5,000/- was paid by the Block Development Officer of Thottambedu Panchayat Samithi. The suit is bad for not bringing the legal representatives of the Ex-president and, therefore, the suit is liable to be dismissed.
On the basis of the above pleadings, the following issues were framed for trial:
1. Whether the defendants are liable to pay the suit amount to the plaintiff?
2. To what relief?
On behalf of the plaintiff, P.W.1 was examined and marked Exs.A1 to A-12. On behalf of the defendants, D.W.1 was examined and marked Exs.B-1 and B-2.
After considering the evidence on record, the learned Subordinate Judge dismissed the suit and aggrieved by the said judgment, the present appeal is filed.
The points that arise for consideration are:
1. Whether the defendants are liable to pay the suit amount?
2. Whether the judgment and decree passed by the learned Subordinate Judge is legal and sustainable?
POINTS:
There is no dispute about the establishment of the society and defendants 3 to 6 were being members and late Venkatasubbachari was the chairman. It is also not in dispute that some money was realised by
the Backward Classes Finance Corporation. It is also not in dispute that there is correspondence between the Collector and the plaintiff bank in Exs.A-8 to A-11 advising for grant of the loan and ultimately the loan was granted. A deed of guarantee was said to have been executed by the Collector on 03.11.1996 for a sum of Rs.1,36,000/- as a continuing guarantee and the factum of the execution of the promissory note by D-3 to D-6 and the chairman was also not in dispute. The plaintiff bank has debited a sum of Rs.40,800/- on 11.01.1997 towards the first release as per the statement of account of defendant No.1. It appears that K.Venkatasubbachari, the chairman has withdrawn without any authority or resolution to a tune of Rs.5,000/- on 11.01.1977 and Rs.1,495/- on 22.04.1977. The lower Court found that even without payment of the total amount of Rs.40,800/-, the interest was calculated and by 30.09.1978 the amount came to Rs.52,654.70 ps. and on 14.10.1978 a sum of Rs.36,160/- was credited from the S.B. account to the loan account. This is disclosed from Ex.A-12. The finding of the lower Court clearly goes to show that there was no disbursement of the total amount of Rs.40,800/and only a sum of Rs.6,495.70 ps. was drawn and therefore, the adjustment of the amount and the claim for amount is not legal. The lower Court found that there was no disbursement, but however, the promissory note was obtained under Ex.A-6 and slept over for four years and Ex.A-7 was obtained subsequently. Therefore, the material evidence discussed by the lower Court and adduced by the parties clearly goes to show that there was no total disbursement of Rs.40,800/and consequently any amount of interest added on the loan account by keeping the money in the S.B. account is not valid.
Evidently, the society is said to have been defunct on 14.10.1997 and the renewal promissory notes Exs.A-6 and A-7 are said to have been executed on 22.10.1980 and 15.10.1983 after the society was defunct. The lower Court also found that there is no material to show that those persons, who have executed Exs.A-6 and A-7 have got authority to renew the debts, are members of the managing committee and in fact the
appeal against the respondents 1 and 2, who are the prime borrowers, was dismissed for default on 07.12.2007 and no steps were taken.
The contention of the appellant that the decree should have been passed against the defendant No.7.
Evidently, even at the stage there is no material to come to a conclusion that in fact a sum of Rs.40,800/- was disbursed to the society and the grounds of appeal also does not disclose conclusive material about the above fact.
Therefore, in view of the above circumstances, I find that as already some adjustments were made from the Government, there cannot be also any decree against the 7th defendant, who is only a guarantor, when the appeal against the principal is dismissed and also when the persons, who are said to have renewed the debt after it was barred by time have no authority and by then the society having become defunct. Therefore, there are no merits in the appeal.
Accordingly, the Appeal Suit is dismissed, but under circumstances, no costs.
N.R.L.NAGESWARA RAO, J
DATE: 07-02-2012 MR
THE HON’BLE SRI JUSTICE N.R.L.NAGESWARA RAO
APPEAL SUIT No. 2054 of 1993
DATE: 07-02-2012
MR
3 issues framed by the court
Whether the defendants are liable to pay the suit amount given the lack of full loan disbursement and defunct status of the society?
Whether the renewal promissory notes executed after the society became defunct are valid?
Whether a decree should be passed against the guarantor when the principal borrower's appeal was dismissed for default?
Plaintiff
Defendants 1 to 6
Defendant 7
N.R.L. Nageswara Rao
As recorded by the court registry
Judgements on the same questions, provisions and authorities, from every court
