Allowed

A.P.State Essential Commodities Corpnltd v. Syndicate Bank Bm and 2

Telangana HC1 Sept 2023AS/3721/2000

Case brief

AI extract

What is this about?

The High Court allowed an appeal by a surety (Defendant No.3/Appellant) against a decree recovered from him. The trial court had dismissed the suit against principal borrowers but decreed it against the surety. This court held that since the principal borrowers were exonerated, the surety's liability cannot stand.

What did the court decide?

Suit against the appellant is dismissed; Judgment and decree dated 15-7-2000 in the lower court are set aside.

A.P.State Essential Commodities Corpnltd Vs… — Civil Procedure and Limitation | Telangana HC (2023)

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[³²¹⁶ ]

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IN THE HIGH COURT FOR THE STATE OF TELANGANA AT HYDERABAD

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FRIDAY, THE FIRST DAY OF SEPTEMBER TWO THOUSAND AND TWENTY THREE

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PRESENT

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THE HONOURABLE SRI JUSTICE M.LAXMAN

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APPEAL SUIT NO: 3721 OF 2000

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Appeal under section 96 of C.P.C against the Judgment and Decree Dated 15-7-2000 made in OS No.225 of 1996 on the file of the Court of the l"'Additional Senior Civil Judge, Warangal.

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Between:

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The A.P State Essential Commodities Corporation Limited Rep by its Managing Director, Civil Supplies bhavan, Somjaiguda, Hyderabad

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...AppellanU3'd Defendant

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AND

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Syndicate Bank, hanumakonda rep. by its Branch manger, D.V.N Kamaraju,

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...RespondenUPlaintiff

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V rajamouli S/o Pochaiah, Occ: Driver, R/o H.No.4-6-12, Kurharpalli, Hanumakonda Village and Mandal, Warangal District

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Yelpula Kumaraswami S/o laxminarayana , Occ: Driver R:/o eallanadu H.NO.2-28, vardhannapet Mandal, Warangal District

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R - 2 dismissed for default vide Court Order dated 09-02-2010

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...RespondenU I & 2 Defendants

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CMP. NO: 24'155 OF 2000

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Petition under Section^',l51 CPC praying that in the circumstances stated in the affidavit filed in support of the petition, the High Court may be pleased to stay all further proceedings in OS No. 225196 on the file of the l"tAdditional Senior Civil Judge, Warangal, dt.15-7-2000 pending disposal of the Appeal Suit

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Counsel for the Appellant : SRI CHALAKANI VENKAT YADAV

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Counsel for the Respondent No.1 & 3 : None appeared

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The Court delivered the following: JUDGMENT

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I r)

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THE ION'BLE SRI JUSTICE M. LAXMAN

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APPEAL SUIT No,3721 of 2OOO

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JUDGMENT:

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The chzrllengc in the prcsent appeal is to thc^{jLrdgnrent and} decree dated 15,O7.2OOO in O.S.No.225 of 1996 on^l.he fitc^of the^I .Additional Senior Civil Judge, V/arangal (hereinafter rel'erred to^as 'trizrl Court'), whcrcin and whereb-y the suit liled by the respondent No.1 herein for recovery of Rs.3,03,556/' was^partly erllorvecl orderir-rg recovery from tl-tc appellant herein. The^present a;:peal is lilcd arl the instance of ciefendant^No.3 belore the trial Court

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IS ')-. The appcllant hercrrr is dclt:ndant No.3, respondr:nt No.l plaintiff and responclcnt Nos.2 and 3 are delendant Nos. I and 2 before the trial Court. F-or the sake of convcnience the^particsarre hereinafter refcrred to as thr:y rverc zrrra.yed in suit

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lt is thc case of the plaintill that they h:rvc extended^an amount of Rs. 1, 14,OOO I - to'*,ards loan for^put'chastr of tractor atrd trailer r.rnder a schenre called 'Own Yoltr Tractor'^{provided by A.P.} Stzrte Essential Commoditics Corporation l.imitecl,^Warangal. Under l-he said scheme. loarn amoLtut was sanctioncd to^clr:fcrtdamt flos. 1 and 2 to purclrasc l.raclor ancl trailcr at.tcl thc same^"ras released on 02.0l.l98ffiTfcctlv to lhe IIMT Limircd, Char.rdigerrh

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and Shekar Industries, Warangal.^{Defendant No'3 stoodas} surety for repayment of loan amount borrowed^{by defendant} Nos.1 and 2. Defendant Nos.1 and 2 were^{principal borrowers} and defendant No.3 is guarantor to the said loan transaction^and memorandum of agreement was also entered infavour of^plaintiff on 02.01.1986. An amount of Rs.2,850/-^{was payable per} month from 02.02.1986 with interest at 13.5%^per annum with^quarteriy compound for the loan amount ol Rs. 1,I4,OOO/-. They^also agreed to pay interest at 2.5o/o on overdue amount. The last payment of Rs.4,000/- was made on 24.06.1994. Subsequently, no payments were made in spitc o[ demands.^{Hence, legal notice} dated 08.lo.l994 was issued to defendants and as there^{was no} response to the legal notice, the present suit is liled

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4, Defendant Nos. I and 2 filed their common written statement stating that defendant Nos. 1 and 2^were only^engaged as^drivers to the tractor and trailer by the District Supply^Officer for^supply of essential commodities from^go-downs to the door step of fair price shop dealers. They were paid an amount of Rs.75O/-^per month. They contended that they were not loanees and^the Collector, Civil Supplies, Warangai,^was loanee.^Hence, they^are not liable to pay any amount and prayed to dismiss the suit.

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Similarly, defendant No.3 filed^{writtenstatement claiming} that they are only sponsorers and they^{are unconcernedwith the} loan transaction, 8O% loan amount^{was to be sanctioned by the} plaintiff and 2OYo by the sponsoring agency.^{The Tractorwas} registered in the name of Collector,^{Civil Suppties, Warangal,and} hypothecated to plaintiff. Further,^{tl-re District Supply Olficer i.e.,} the Ex-Officio District Manager of^{A.P.S.E.C.C'L,was not} authorized to sign loan agreement arrd^{stand as surety.He} exceeded his pow-ers without any^{proper resolutionfrom} Corporation. Therefore, they are^{not liable to pay any arnount.} Hence, prayed to dismiss the suit^againstthem.

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On the basis ol above pleadings,^{the follorving issues r'vere} framed by the trial Court:

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'1. Whether the agreement^{of guarantcedatcd02.01. 1986} executed by the then DSO^{is binding on D3?}

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Whether the D 1 and D2 availed^{the loan jointly in their} individual capacity, if so defendants¹ lo 3^{arc jointly liable} for the suit claim?

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Whether the defendants l^{and 2executed the loan} documen ts?

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Whether the sta.tement of^{accountfiled by the ptaintiffis} correct, if so, plaintiffs are entitled^{lor the suit claim?}

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Whether thc rale of interest^claimcdby thc^plaintifiis proper?

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To what relicP"

The plaintiff in support of its case got examined^{P.W.l and} marked Exs.A-l to A-10. The defendants got examined D.Ws.1 to 3 and got marked Exs.B- 1 to B-12

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The trial Court after appreciating the evidence on record dismissed the suit against defendant Nos.l and 2 and decreed the suit against defendant No.3. Aglyieved by the said decree, the present appeal is liled by defendant No.3.

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Heard both sides.

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Now, the only point for consideration in the present appeal is as follows:

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"Whether the liability of dcfendant No.3/appellant. can be hxed when the principal borrowers are exonerated from the liability?"

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Point:-

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1 1. The evidence on record shows that the plaintiff-bank claims that they have lent an amount of Rs. 1,L4,OOO l- for purchase of tractor and trailer to defendant Nos. I and 2. In this regard, loan agreement was entered and defendant No.3 stood as guarantor. The loan amount was directly released to HMT Tractor Company, Chandigarh, and the tractor and trailer were registered in the name of the Collector, Civil Supplies, Warangal. The evidence a-lso shows that there is a scheme named as 'Own Your Tractor'

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and this scheme was floated for creation of employment and conferring ownership rights after the loan amounts are cleared Initially, defendant Nos.l and 2 were emplol,ed as drivers for monthly salary of Rs.750/-. The evidence also shows that defendant No.l retrenched from employment and other person was appointed as driver. These are all things which show that the loan was granted to them. If Ioan was granted to purchase tractor and trailer in their name, the same should have been registered in their name and they should have been treated as ou,ners of the tractor and trailer and the same should have been hypothecated to plaintiff-bank. Such rights were not created on them under the scheme. This indicates that after clearance of the loan, the driver becomes owner. This also rneans that the loan a.rnount is not paid to defendant Nos.l and 2 by the plaintiff-bank. [f really, t]rat is so, the tractor and trailer should have been registered in their name and hypothecated to bank and not in the name of the Collector, Civil Supplies, Warangal.

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I I

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In fact, the tractor and trailer^'',ve re registered in the name of Collector, Civil Supplies, Warangal, and loan rvas benefited to him. Therefore, the Collector, Civil Supplies, Warangal, becomes principal borrower though loan agreement was obtained in the name o[ defenda-nt Nos.1 and 2. The suit was dismissed against

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defendant Nos. 1 and 2, whom the plaintiff_bank claimed to have been the principal borrowers. There is no challenge against the said dismissal from the plaintiff-bank. when, the suit itself is dismissed against principal borrower, the suit against the surety cannot be decreed. The trial Court committed error in fixing the liability on defendant No.3, when suit itself is dismissed against the principal borrower.

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In the result, the appeal is allowed and the judgment and decree dated 1S.07.2O00 in O.S.No.225 of 1996 on rhe file of the I Additional Senior Civil Judge, Warangal, is set aside Consequently, suit against defendant No.3 t.e., the appellant herein is clismissed, since the dismissal of suit against other defendants attained finality. No order as to costs. Misceuaneous petitions, if any, pending shall stand closecl.

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SD/- B.S. CHIRANJEEVI. JOINT REGISTRAR.

//TRUE COPYII

To,

SECTION OFFTCER

' Jl;;"oooitionalsenior^{civitJudge,warangat,(with} records, if 3. ?,1533 f";"'oKANT,ENKAT 'ADAV, Advocate lopuc]

ADK g

HIGH COURT

DATED:01 10912023

JUDGMENT

AS.No.3721 of 2000

jI AT i:- O
(
ji
{'t'$ 1rl\ I
/
.,

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ALLOWING THE APPEAL SUIT WITHOUT COSTS 0 8y, ilvt*

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IN THE HIGH COURT^{FOR THE STATE OF TELANGANA} AT HYDERABAD

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FRIDAY, THE FIRST DAY^{OF SEPTEMBER} TWO THOUSAND AND^TWENTYTHREE

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PRESENT

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THE HONOURABLE SRI^{JUSTICE M.LAXMAN}

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APPEAL SU lT NO: 3721 OF²⁰⁰⁰

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Between:

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The A.P State Essential Commodities^{Corporation LimitedRep by its} Managing Director, Civit Supplies^{bhavan,Somjaiguda, Hyderabad}

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...AppellanU3d Defendant

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AND

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Syndicate Bank, hanumakonda^{rep. by its Branch manger,D'V'N Kamarqju'}

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...RespondenUPlaintiff

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V raiamouli S/o Pochaiah,^{Occ: Driver, R/o H.No.4-6-12, Kumarpalli,} Hanumakonda Village and^{Mandal' Warangal District}

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Yelpula Kumaiaswami Sio^{laxminarayana} ,^{Occ: DriverR/o eallanadu} H.NO.2-28, vardhannapet Mandal,^{Warangal District}

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R - 2 dismissed for default^{vide Cou( Orderdated 09-02-2010}

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...ResPondenU i &^{2 Defendants}

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Appeal under section 96 of^{c.P.cagainst the Judgmentand DecreeDated} 1S-7-2OOO made in OS No.225^{of 1996on the file of the Court of the l"tAdditional} Senior Civil Judge, Warangal.

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ORDER: This appeal^{comingon for hearing and upon perusing the grounds of} appeal, the Judgment^{and Decree of the Lowercourtand the material papers in the} case and upon hearing^{the arguments of sRl GHALAKANIVENKATYADAV,} Advocate for the Appellant^{and none appeared for the respondentno 1& 3'}

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This Court doth Order and Decree as follows:

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.1. That the Appeal Suit be and hereby is allowed

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That the Judgment and decree dated 15-7-2000^{madein OS No.225of 1996} on the file of the Court of the l"tAdditional Senior^{Civil Judge,Warangal be} and hereby is set aside,

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That the suit against defendant No.3 i.e., the appellant^{herein is dismissed} as the dismissal of suit against other defendants attained^finality

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That there shall be no order as to costs in this appeal

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D/. B.S. CHIRANJEEVI, JOINT REGISTRAR.

//TRUE COPY//

SECTION OFFICER

To,

The l't Additional Senior Civil Judge, Warangal,^(With records, if any)

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Two CD Copies

ADK

i /

HIGH COURT

DATED:01 10912023

DECREE

AS.No.3721 ot 2000

ALLOWING THE APPEAL SUIT WITHOUT COSTS g4'a g",

A.P.State Essential Commodities Corpnltd v. Syndicate Bank Bm and 2

Case brief

What is this about?

What did the court decide?

A.P.State Essential Commodities Corpnltd v. Syndicate Bank Bm and 2

Case brief

What is this about?

What did the court decide?

What the court decided

A compact analysis

Issues for consideration

Statutes considered

Parties & counsel

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