Final Order 17

Order Details: COPY OF JUDGMENT
Pdf Text: IN THE COURT OF MS. KIRAN BANSAL:
DISTRICT JUDGE (COMMERCIAL COURT-02
SHAHDARA DISTRICT
KARKARDOOMA COURTS : DELHI
Civil Suit (Comm) No. 295/2024
IN THE MATTER OF:
The Jammu & Kashmir Bank Ltd.
Having its corporate office at:
M.A. Road, Srinagar, Kashmir and
A branch amongst at
others at Naveen Shahdara, Delhi
Through AR Sumit Mahajan
…. PLAINTIFF
Versus
1. Mr. Amit Negi,
S/o Sh. Shankar Singh Negi
R/o S-22, Second Floor, Kamla Sadan,
Naveen Shahdara, North East, Delhi – 110032
Also at:
1/9936, Ground Floor, Babarpur Road,
West Gorakh Pur, Delhi
Also at:
M/s Amit Shop having its office at
1/9708, 2 West Rohtash Nagar,
Pratap Pura, Shahdara,
East Delhi – 110032
2. Mr. Ajay Negi,
S/o Sh. Shankar Singh Negi
R/o S-22, Second Floor, Kamla Sadan,
Naveen Shahdara, North East, Delhi – 110032
Also at:
1/9708, Gali No.2,
Near Post Office West Rohtash Nagar,
Shahdara, East Delhi – 110032
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3. Mr. Satish Sachdeva,
S/o Late Sh. K.L. Sachdeva,
R/o BT-34, Near SBI Bank,
Shalimar Bagh, Saraswati Vihar,
North West, Delhi – 110024
Also at:
1051/1A, Rohtash Nagar,
Shahdara, below Jammu & Kashmir Bank,
Delhi – 110032 …. DEFENDANTS
Date of Institution : 17.05.2024
Date of hearing final arguments : 02.06.2025
Date of Conclusion: : 06.06.2025
JUDGMENT
1. The plaintiff bank has filed the present suit for recovery
of Rs.5,07,308.60/- along with pendent-elite and future interest from
01.12.2023 till its realisation against the defendants.
2. It is stated that Sh. Sumit Mahajan working as Bank
Manager is authorized to sign, verify, file, institute and to depose on
behalf of plaintiff bank vide authorization/power of attorney dated
20.02.2023. It is submitted that defendant no. 1 Sh. Amit Negi is a sole
proprietor of M/s Amit Shop, defendant no. 2 Sh. Ajay Negi along
with Sh. Satish Sachdeva, defendant no.3 were guarantors in cash
credit facility of Rs.4 lakhs. It is stated that plaintiff bank has allowed
cash credit limit of Rs.4 lakhs in favour of defendant no.1 against the
security of hypothecation of stock including all types of photographic
goods, films, artificial wood clocks, time pieces and parts etc. and
collateral security of third party guarantee of defendant no.2 and 3.
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2.1 Plaintiff has stated that defendant no. 1 approached the
bank for availing loan facility and at his request vide sanction letter
dated 29.11.2017, the cash credit facility of Rs.4 lakh was provided on
execution of the following documents:
i. Letter of Undertaking dated 06.12.2017;
ii. Hypothecation Agreement dated 06.12.2017;
iii. Loan Agreement dated 06.12.2017;
iv. Irrevocable Power of Attorney dated 06.12.2017;
v. Affidavit dated 06.12.2017;
vi. Letter of Waiver dated 21.12.2017;
vii. Demand Promissory Note of Rs.4 lakhs dated 21.12.2017;
viii. Letter of Continuity dated 21.12.2017
2.2 It is submitted that apart from said security documents
defendant no. 2 and 3 also executed Deed of Guarantee dated
06.12.2017 and on 20.12.2020 defendant no. 1 executed the Fresh
Demand Promissory Note of Rs.4 lakhs. It is submitted that defendant
no. 2 and 3 both stood as guarantors in their personal capacity and
individual capacities and are jointly and severally liable to pay the
liability of the cash credit facility of Rs. 4 lakhs. It is submitted that
loan amount of Rs.4 lakhs was to be repaid along with interest @
MCLR + 3.50% i.e. 12.30% per annum with monthly rest in terms of
agreement. Further, it is submitted that a loan account bearing no.
0287020100002837 was started with effect from 21.12.2017 and
defendant no.1 started utilizing the funds, but, on various occasions
defaulted in due payments of loan amount. Further, it is submitted that
due to breach of terms and conditions of the agreements and other
security documents, the account of defendant no. 1 was declared as
Non Performing Asset (NPA) on 03.07.2021 as per RBI guidelines.
Thereafter, defendant no.1 approached the plaintiff Bank and executed
the balance confirmation dated 08.11.2021 for an amount of
Rs.4,14,818.60 as on 31.10.2021. On 02.08.2022, the last payment
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was made by the defendant no. 1 in loan account no.
0287020100002837. Legal notice dated 03.09.2022 was served upon
the defendants, but, despite that neither of defendants paid the
outstanding amount. Thereafter, after several requests and follow ups,
plaintiff bank eventually sent two legal notices i.e. notice for
liquidation of balance outstanding and notice regarding invocation of
personal guarantee extended in cash credit loan availed by defendant
no.1. It is submitted that plaintiff bank being a banking company
maintains a correct and regular accounts in normal course of banking
business which reflects the total outstanding balance as on 30.11.2023
as Rs.5,07,308.60/-, therefore, the defendants are liable to pay interest
on outstanding amount @ 12.30% compounded monthly with effect
from 01.12.2023 till its realisation.
2.3 It is submitted that proceedings under Section 12A of
Commercial Courts Act, 2015 has been completed and Non Starter
Report dated 23.01.2024 was issued. Further, it is submitted that the
present court has the territorial jurisdiction as all the contractual
transactions, opening of account, signing of documents, disbursement
of amount and deposits in account took place within the jurisdiction of
this court. Further, it is submitted that this court has pecuniary
jurisdiction to try and adjudicate the present matter. Further, it is
submitted that value of the suit for purpose of court fees is fixed for
Rs.5,07,308.60 on which requisite court fees of Rs.7,400/- is paid.
3. WS has been filed by defendant no.1 stating that the
dispute between the parties is a result of special circumstances
occurred due to pandemic situation of Covid – 19 as defendant no.1
suffered losses in photo studio during that time and had closed his
shop due to continuous losses. Defendant submitted that he had taken
the loan to invest the money in his photo studio situated at Naveen
Shahdara in the name and style of M/s Amit Studio, but, when
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pandemic came the defendant had no option except to close his shop
which was taken on lease and due to losses, defendant no. 1 came
under huge debt and was not able to pay the installments of plaintiff
bank after year 2022. Defendant has submitted that he continuously
paid the interest against the loan from 2017 to 2022, but, thereafter, he
was not able to pay interest and installments of loan amount.
3.1 It is stated that defendant is now working on daily wages
as a waiter in marriage function and other basic functions and is hardly
able to earn Rs.15,000/- per month and his shop at Naveen Shahdara
has already been closed. Defendant submitted that he has old aged
parents, wife and a minor child in his family who are totally dependent
upon defendant and in this meager income, the defendant has to pay
rental charges of Rs.6,500/- per month of the flat in which he is
residing. Lastly it is submitted that defendant no.1 never been
defaulter in paying loan installments, but, it was his worst financial
circumstances due to which he was not able to pay the installments.
Remaining material contents of the plaint are denied by
the defendant and prayer has been made for dismissal of the suit with
heavy cost.
4. Defendant no.2 filed the WS stating that dispute between
the parties is a result of special circumstances which occurred due to
pandemic situation as brother of defendant no.2, namely, Amit Negi
who took the loan had suffered losses in his photo studio. Defendant
no. 2 submitted that due to losses, defendant no. 1 was not able to pay
the installments of plaintiff bank after 2022 and he was stood as
guarantor in the loan. He further submitted that defendant no. 1 had
continuously paid the interest against the loan from the year 2017 to
2022, but, due to serious financial crisis, he could not able to pay the
interest and installments of loan amount and even he and his family
members came on starvation and hardly managed to bear the expenses
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of their livelihood. Lastly, it is submitted that the interest upon the
principal amount is beyond the financial capability and they are not in
a position to pay this amount.
Remaining material contents of the plaint are denied by
the defendant and prayer has been made for dismissal of the suit with
heavy cost.
5. Defendant no.3 filed the WS stating that suit is not
maintainable qua defendant no.3, in as much as, he had only signed a
blank document at the request of defendant no.1. It is submitted that
neither the bank official, nor the witnesses were present at the time of
signing of document. Further, it is submitted that defendant no.3 had
signed the blank document at the request of mother of defendant no.2
who has been working with defendant no.3 for more than 25 years. It
is submitted that the document did not bear the signatures of bank
representative or witnesses at the time of signing by defendant no.3.
Further, it is submitted that plaintiff's loan is fully secured by way of
hypothecation agreement dated 06.12.2017 and the same can be
recovered by invoking hypothecation. Lastly, it is submitted that the
alleged document Deed of Guarantee is neither legal nor valid in eyes
of law and the same having not been executed as per law.
Remaining material contents of the plaint are denied by
the defendant and prayer has been made for dismissal of the suit with
heavy cost.
6. During admission/denial, defendant no. 1 and 2 have
admitted the following documents of the plaintiff i.e.
• Copy of GPA/Authorization dated 20.02.2023 as Ex.P1;
• Copy of Sanction dated 29.11.2017 with application form,
borrowers’ statement and guarantor statement as Ex.P2;
• Copy of letter of undertaking dated 06.12.2017 as Ex.P3;
• Copy of hypothecation agreement dated 06.12.2017 as Ex.P4;
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• Copy of loan agreement dated 06.12.2017 as Ex.P5;
• Copy of GPA dated 06.12.2017 as Ex.P6;
• Copy of affidavit as Ex.P7;
• Copy of letter waiver dated 21.12.2017 as Ex.P8;
• Copy of demand promissory note dated 21.12.2017 as Ex.P9;
• Copy of letter of continuity dated 21.12.2017 as Ex.P10;
• Copy of third party guarantee dated 06.12.2017 as Ex.P11;
• Copy of demand promissory note as Ex.P12;
The defendant no. 3 during admission/denial has not
admitted any of the documents of plaintiff.
On the otherhand, ld. counsel for plaintiff has submitted
that as the defendants have not filed any documents along with the
WS, thus, no admission and denial of documents are required on
behalf of plaintiff.
7. On completion of pleadings of parties, following issues
were framed for consideration vide order dated 24.02.2025:
i. Whether the plaintiff is entitled for money decree? If so, to
what amount? OPP.
ii. Whether the plaintiff is entitled to any interest? If so, at what
rate and for which period? OPP.
iii. Relief.
8. It is pertinent to mention that an application under
Section 151 CPC filed on behalf of plaintiff for substitution of AR
which was allowed vide order dated 17.03.2025 and plaintiff was
permitted to pursue the present case through its new AR Sh. Ravi Kant
Sharma.
9. Plaintiff has examined its AR Sh. Ravi Kant Sharma as
PW-1 who tendered his evidence by way of affidavit which is
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Ex.PW1/A and has relied upon the following documents:
• Certificate as per Bankers Book Evidence Act as Ex.PW1/1;
• Certificate under Section 65B Indian Evidence Act as
Ex.PW1/2;
• Affidavit of statement of truth as Ex.PW1/3;
• Copy of POA/Authorization dated 15.12.2016 as Ex.PW1/4
(OSR);
• Sanction Letter dated 29.12.2017 along with Loan Application
Form and customer statement of defendants as Ex.PW1/5
(colly) (also Ex.P2);
• Letter of undertaking dated 06.12.2017 as Ex.PW1/6 (also
Ex.P3);
• Hypothecation Agreement dated 06.12.2017 as Ex.PW1/7 (also
Ex.P4);
• LoanAgreement dated 06.12.2017 as Ex.PW1/8(also Ex.P5);
• GPA dated 06.12.2017 as Ex.PW1/9 (also Ex.P6);
• Affidavit dated 06.12.2017 as Ex.PW1/10 (also Ex.P7);
• Letter of waiver dated 21.12.2017 as Ex.PW1/11 (also Ex.P8);
• Demand Promissory Note dated 21.12.2017 as Ex.PW1/12
(also Ex.P9);
• Letter of continuity dated 21.12.2017 as Ex.PW1/13 (also
Ex.P10);
• Deed of Gaurantee dated 06.12.2017 as Ex.PW1/14 (also
Ex.P11);
• Demand Promissory Note dated 20.12.2020 as Ex.PW1/15
(also Ex.P12);
• Balance Conformation dated 08.11.2021 as Ex.PW1/16;
• Demand notices to all defendants along with postal receipts are
Ex.PW1/17;
• Demand promissory note dated 31.10.2023 as Ex.PW1/18;
• Balance Conformation dated 31.10.2023 as Ex.PW1/19;
• Certified Copy of Statement of Account No.
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0387020100000124 dated 09.01.2019 to 31.01.2024 along
with certificate as Ex.PW1/20;
• Original NSR issued by South East DLSA 21.02.2024 as
Ex.PW1/21.
• Affidavit under Order XI Rule 6 (3) of Commercial Courts Act
is Ex.PW1/22 (inadvertently not mentioned in my affidavit).
PW-1 was cross examined by the respective counsel for
defendant no. 1, 2 and 3 and thereafter, PE was closed on the
statement of plaintiff.
10. In rebuttal, defendant no. 1 examined himself as DW-1
and tendered his evidence by way of affidavit Ex.DW1/A. He was
duly cross examined by ld. counsel for plaintiff.
10.1 Sh. Satish Sachdeva examined himself as DW3/1 and he
was also cross examined by ld. counsel for the plaintiff. Thereafter,
DE was closed on the statement of defendant.
11. The court has thoroughly gone through the testimony of
witness and perused the material on record and have also duly
considered the arguments advanced. The findings on the issues are as
under :
ISSUE No. (i) :
Whether the plaintiff is entitled to money
decree? If so, to what amount?OPP
12. The onus to prove the said issue is upon the plaintiff.
Plaintiff has duly complied with mandatory provision of Pre-
Institution Mediation and Conciliation as provided in Section 12 A of
Commercial Courts Act, as per the Non-Starter Report dated
23.01.2021 Ex.PW1/21.
13. As far as the territorial jurisdiction is concerned, this
court has the territorial jurisdiction over the present case since the loan
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has been sanctioned by Naveen Shahdara Branch which falls within
the jurisdiction of this Court and the defendants are also residing as
well as running his business within the jurisdiction of this Court.
14. As far as the period of limitation is concerned, as per
Sanction Letter Ex.PW1/5 (colly) which is admitted by defendant as
Ex.P2, the loan amount of Rs.4,00,000/- was sanctioned on 29.11.2017
and as per Statement of Account Ex.PW1/20 the last payment of
Rs.2,000/- was made on 02.08.2022. The application for Pre-
Institution Mediation was filed by plaintiff before the DLSA, Shahdara
District on 20.11.2023. Since the period of limitation is three years
and the present suit is filed on 17.05.2024, thus, the present suit is
filed within the limitation period of three years.
15. Moreover, this court also has the pecuniary jurisdiction
over the matter since the suit amount claimed by the plaintiff is more
than the specified value of Rs.3 lacs of the Commercial Courts.
16. The defendant no. 1 and 2 has not pleaded any specific
defence and their only plea is that due to Covid-19 pandemic they
could not repay the loan amount. However, ld. counsel for
defendant no. 3 has argued that defendant no. 3 is not liable to pay the
loan amount as he has signed on blank document and it is further
argued that the dispute in the present case is not a commercial dispute
and therefore, the present court does not have jurisdiction over the
subject matter of the case.
17. Ld. Counsel for the defendant no.3 has relied upon the
following judgment in support of his contentions. The court shall now
deal with these judgments one by one.
(i) Reactive Chemicals and Solvents vs Indian Overseas
bank Civil Suit (Commercial Division) 639 of 2018 decided by
Hon’ble Madras HC on 09.06.2022
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18. The said suit was filed by the plaintiff against the bank
seeking to recover the surplus amount received by the bank in the
auction of the mortgaged property. In the said case, the plaintiff had
availed a cash credit facility by creating a mortgage on a property.
Thus, issued before the Hon’ble Madras HC in the said case was that
whether section 34 of the SARFAESI Act is attracted or not? The
defendant in that case has contended that the dispute involved
pertained to the loan account and the sale was ordered under
SARFAESI Act and thus, the jurisdiction to try the matter was with the
DRT and not with civil courts, in view of Section 34 of the SARFAESI
Act r/w Section 11 of the CC Act.
19. In this regard, Hon’ble HC held that the suit was
incidental or ancillary to sale under section 13(4) of the SARFAESI
Act and the amount due and payable to the bank is a matter within
jurisdiction of the DRT. Thus, it was held that civil court’s jurisdiction
was barred by Section 34 of the SARFAESI Act. However, the said
decision is squarely distinguishable on the facts of the case as in the
present case, the jurisdiction of the DRT is not attracted by virtue of
the fact that jurisdiction of the DRT can be availed of only if the
disputes involved the subject matter of value more than Rs. 20 Lacs.
Moreover, the said case was suit to recover the surplus amount of the
money received by the bank in sale under SARFAESI Act. On the
other hand, the present case is a suit for recovery filed by the bank
against the defendant(s) when the defendant defaulted on its cash
credit facility. Thus, the said judgment is not applicable in the facts of
the case.
(ii) Meena Vohra vs Master Hosts Pvt Ltd 2025:DHC:1795
decided by Hon’ble Delhi HC on 18.03.2025
20. In this case, the plaintiff’s deceased brother Late Mr.
Mohinder Kapur advanced a loan of Rs.16,50,000/- out of his own
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funds to the defendant no. 1 at interest of 12% p.a. with no fixed
timeline for repayment. Moreover, the loan was given out of his own
funds. Therefore, the Hon’ble HC held that on account of facts and
circumstances, the transaction pertains to personal loan and that would
not constitute a commercial dispute within meaning of the Act. It is
was also observed by the Hon’ble Delhi HC that the loan was not
advanced in the ordinary course of business and has no relation to
trade, commerce or business of the plaintiff’s deceased brother.
However, the above said decision is distinguishable on the facts of the
case in as much as the loan involved in that case was given in the
personal capacity and out of his own funds and also the terms and
conditions of the loan reflected that the dispute was not commercial
dispute. In the present case, the loan was given by public bank and not
out of its personal fund rather it was the public money. Moreover, it
was given in the ordinary course of business and commerce and with
intention of profit making. Thus, the said case is not applicable to the
facts of the present case.
(iii) Qatar Airways Q.C.S.C vs Airport Authority of India and
Anr CS (Comm) No. 52/2017
21. This case pertains to dispute related to the recovery for
damages for loss on account of damage to the plaintiff’s aircraft
attributable to the defendant. The facts of the case are also
distinguishable from the facts of the present case and therefore, it can
not be said to apply in the present case.
(iv) Ladymoon Towers Private Limited vs Mahendra
Investment Advisors Private Limited CS/99/2020 decided by Hon’ble
Calcutta HC on 13.08.2021
22. In this case the plaintiff had provided for a loan to the
defendant. It was also observed by the court that plaintiff and
defendant were known to each other because of which plaintiff
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provided defendant with short term loan. Further, from the
memorandum of association of the plaintiff, it was observed that the
plaintiff’s regular business was not of lending money rather was of
construction. The Hon’ble HC stated the same to be a ‘hand-loan’
which was not given in the regular course of business or as a
commercial loan. It was held by the Hon’ble HC that the loan in
dispute does not pertains to commercial dispute as the essential
commercial flavour in such loan was lost by reason of the informal
terms under which money is lent. However, it was observed that
categories under the term ‘commercial disputes’ seeks to bring within
its fold an inclusive range of disputes where the underlying purpose of
transaction is a commercial interest of the parties.
23. The said judgment is not applicable to the facts of the
present case as there was a formal transaction between the parties in
this case and that the transaction was intended to serve the commercial
interest of the parties i.e. expected return of interest on the part of bank
and availing of cash credit facility by the defendant.
(v) Bharat Huddanna Shetty vs Ahuja Properties &
Developers 2021 LawSuit (Bom) 2036 decided by Hon’ble Bombay
HC on 13.07.2021
24. In this case, the plaintiff has given a friendly loan to the
defendant. The defendants executed bills of exchange and issued
cheques as well. But the cheques were dishonoured, so the plaintiff
filed the present suit against the defendants for recovery. The Hon’ble
HC observed that not every instance of lending must reek of business
or trade. Thus, it was held that where plaintiff lent a friendly loan, it is
not a transaction between them in the course of their ordinary business
and it can be treated as money lending per se. However, the present
case does not pertain to the informal or friendly loan, therefore, this
case is also inapplicable in the facts of the present case.
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(vi) Rolta Private limited vs Varanium Cloud Limited and
Anr. Summary Suit No. 18 of 2023 decided by Hon’ble Bombay HC
on 11.11.2024
25. In this case, the plaintiff was engaged in the business of
providing leasing services and defendant was involved in business of
information technology and web solutions. The defendant approached
the plaintiff for acquiring the secured financial debt and thereafter,
plaintiff entered into an agreement with the defendant. As per
agreement, the defendant would pay an amount of Rs. 800 Crores to
the plaintiff. Since the defendant did not pay the amount, plaintiff filed
the present suit. The Hon’ble HC held that since the dispute relating to
assignment of debt by the plaintiff no. 1 in favour of defendant no. 1 is
not an ordinary transaction of merchant, banker, financier or trader and
other classes of persons mentioned in Section 2(1)(c)(i) of the Act,
therefore, the same is not a commercial dispute. However, the above
said case is not applicable to the facts of the case as in the present case
one of the parties involved is a public bank whose ordinary transaction
was to provide loans in the course of business. Moreover, the present
case does not involve any question of assignment of debt rather it is a
simpliciter suit for recovery on account of default by the defendant in
repaying the loan amount availed through cash credit facility.
(vii) IHHR Hospitality (Andhra) Pvt Ltd vs Mrs. Seema
Swami & Ors. 2022:DHC:4647 decided by Hon’ble Delhi HC on
14.11.2022
26. The said case pertains to suit for recovery, Declaration
and Permanent Injuction filed by the plaintiff and against the
defendants. It is stated that Late Shri Manoj Kumar Swami was
employed by the plaintiff company as unit Financial Controller. He
had access to the bank account of the plaintiff company and it was
discovered that he had, in conspiracy with other defendants,
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embezzled huge amounts through forged cheques. The present suit
was filed for recovery of the money on account of illegal withdrawals
of money from the account of plaintiff company. Thus, the question
before the court was whether the recovery sought on account of
embezzlement of money from the bank account of the plaintiff can be
held to be a suit of commercial nature.
27. The Hon’ble Delhi HC held that the transaction involved
was not a transaction out of ordinary business transaction and ‘having
arisen in the ordinary course of business.’ Thus, it was held that it is
not a commercial dispute. Ld. Counsel for the defendant relied upon
the observation made by Hon’ble Delhi HC in para 10 of the
judgement which is re-produced as follows:
“10. In the case of Lady Moon Towers Pvt. Ltd.
vs. Mahindra Investment Advisors Pvt. Ltd.
MANU/WB/0547/2021 it was observed by the
High Court of Calcutta that the definition
contemplates a commercial dispute and not any
other form of dispute where the basis of
disagreement between the parties has a non-
commercial cause. The gradation of disputes in
Section 2(i)(c) takes into account all possible
forms of Agreements from which a commercial
dispute may arise; it makes it clear that the
framers of the statute gave emphasis on the
commercial flavour of the transaction as opposed
to agreements entered into between the parties
without a commercial purpose. The commercial
purpose would generally mean a transaction by
which a person’s commercial or economic
interest may be advanced and would result in an
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economic benefit to that person. It would not
include an agreement where profit making is an
incidental outcome of the transaction or may
happen by accident. Home Loan for example is
given by a person or entity to another with the
expected outcome of principle sum being
returned with interest. The essential commercial
flavour in such a loan may be lost by way of
informal terms under which the money is lent and
advanced and the consequent uncertainty which
may result therefrom. It was further observed that
in terms of Section 2(i)(c) ordinary transactions
of merchants, bankers, financers and traders such
as those relating to mercantile documents implies
ordinary transactions between the named persons
and the “mercantile documents” indicates that all
transactions between the specified classes of
persons will not result in a commercial dispute
where the transaction does not relate to
mercantile documents. Only those disputes
arising out of a transaction between the named
classes of persons which has been formalised by
way of a mercantile document would be termed
as a commercial dispute. In the said suit, a loan of
Rs. 50 lakhs had been given by the plaintiff
Company to the defendant since the Directors of
the Plaintiff Company were known to the
defendant since long. It was held that simplicitor
because a loan transaction was involved would
not attract a commercial flavour to it and was
held to be not a commercial dispute.”
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The above said case is not applicable on the facts of the
present case as the suit for recovery filed was for embezzled money
and secondly, the loan was not offered in ordinary course of business.
In the present case, on the other hand, the defendant no. 1 has availed
a cash credit facility and the loan was disbursed as an ordinary course
of business by the plaintiff bank.
28. None of the case relied upon by counsel for defendant
no. 3 applies to the fact of the present case. The cash credit facility
was granted by the plaintiff bank to the defendant and therefore, the
suit is commercial in nature and squarely falls within the purview of
Section 2 (1) (C) of Commercial Courts Act.
29. The defendant no.1 and 2 in the present case had
admitted the facts in their WS that defendant no.1 had taken loan to
invest the money in his photo studio situated at Naveen Shahdara in
the name and style of M/s Amit Studio, but, when pandemic came he
had no option except to close his shop which was taken on lease and
due to losses, defendant no. 1 came under huge debt and could not
able to pay the installments of plaintiff bank after 2022. Even during
cross examination DW-1 admitted that he had taken the loan for the
business of photo studio and he has signed Ex.PW1/5 to Ex.PW1/13,
Ex.PW1/15, Ex.PW1/16, Ex.PW1/18. The relevant portion of the cross
examination of DW-1 is as under:
“I had taken the loan for the business of photo
studio. I was doing the business of photo studio
since 2014. My business was closed in the year
2019 – 2020 due to Covid – 19 pandemic……..
……..At this stage, Ex.PW1/5 to Ex.PW1/13,
Ex.PW1/15, Ex.PW1/16, Ex.PW1/18 and
Ex.PW1/19 are shown to the witness. The witness
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admits that the said exhibits bears his
signature……..”
30. Defendant no.3, however, has taken the plea in the WS
that suit is not maintainable qua him, in as much as, he had only signed a
blank document at the request of defendant no.1 and neither the bank
official, nor the witnesses were present at the time of signing of
document and he had signed the blank document at the request of mother
of defendant no.2 who has been working with him for more than 25
years. The contents of the plaint and documents proved on record by
PW-1 appear to be of an unimpeachable character. Also, once a person
signs a document voluntarily, he/she cannot subsequently escape his/her
liability and plead that he/she had signed blank documents. Even If
he/she signs any blank document, he/she does so at his/her own peril.
Reliance can be placed on the judgment in
Corporation Bank Vs. Sushil
Enterprises & ors. 2003 VIAD Delhi 467 dt. 16.5.2007 wherein it was
held that:
“Nobody is expected to sign the
documents without reading it or when
it is blank and if he does so he does at
his own risk and the very fact that the
plaintiff Bank has disbursed the loan
amount and defendants had availed it
also shows that the documents were
valid and duly executed”.
31. It was further held that :
“The admission of signatures of the
defendant No. 1 upon the documents
in question raises a presumption that
the documents were duly filled in
when these were signed. Had the
defendants not availed the loan
amount and had the payment of the
machinery purchased by defendant
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No. 1 not been made by the plaintiff,
the aforesaid plea of signing the
documents when these were blank
might have cut ice, not otherwise”.
32. In view of the above case law and considering the fact that
defendant no. 3/Satish Sachdeva has signed Deed of Guarantee dated
06.12.2017 Ex.PW1/14 (admitted by defendant no.1 as Ex.P11) at
bottom of every page as well as on the last page at relevant place as
guarantor, thus, his plea of signing blank document is not legally tenable.
Ex.PW1/14 also bears the signature of defendant no. 2/Ajay Negi as
other Guarantor and signature of Branch Manager along with stamp and
signature of two witnesses Abhishek Kumar and Sahil Singh and is a
notarized document, thus, this plea of defendant no.3 that the document
did not bear the signatures of bank representative or witnesses at the time
of signing by defendant no.3 is not sustainable. Further, the plea of
defendant no.3 that he had signed the blank document at the request of
mother of defendant no.2 is also not sustainable in view of the fact that
defendant no.3 has not filed any documentary proof along with WS to
prove that at the time of signing the documents, the same were blank and
have been filled later on. Moreover, the signature of defendant no. 3 is
appearing exactly same as on WS as well as on Ex.PW1/14. After careful
perusal of Ex.PW1/14 and the signatures of the defendant no.3 appearing
at the relevant places on the said document, it cannot be said that blank
documents were signed by the defendant no.3, in as much as, the
signatures are appearing exactly at the relevant places at the bottom of
the page where the complete page is written / typed or in the end of the
page, where contents of the documents are concluded. Even during cross
examination DW3/1 Satish Sachdeva admitted that Ex.PW1/14 bears his
signature at two places on each page. The relevant portion of the cross
examination of DW3/1 is as under:
“…...The Ex.PW1/14 from page no.5 to page no.11
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bears my signature at two places on each page. I
have signed the Ex.PW1/14 which was duly typed
document at the time of execution and signature of
the same. However, at that time sign and stamp of
the bank was not there. It is correct to say that I had
the knowledge when I signed the said document
Ex.PW1/14 that the same is for the purpose of
granting loan to the defendant no.1 Amit Negi…...”
33. Furthermore, defendant no.3 neither disputed the
execution of loan document such as Hypothecation Agreement dated
06.12.2017 Ex.PW1/7 (also Ex.P4) as he stated in the WS that plaintiff's
loan is fully secured by way of hypothecation agreement dated
06.12.2017 and the same can be recovered by invoking hypothecation.
34. The argument of ld. counsel for the defendant no. 3 that
the suit qua defendant no.3 is not maintainable as Deed of Guarantee is
neither legal nor valid in eyes of law does not hold any ground. It is an
admitted position that defendant no. 3 stood as guarantor for defendant
no. 1, thus, the liability of the defendant no. 3 is co-extensive with that of
defendant no. 1 (Principal debtor)1. The principal liability is of the
principal debtor and therefore, the issue if arises, at all, is whether the suit
pertains to the commercial dispute between the plaintiff and defendants.
35. Perusal of the loan application along with sanction letter
reveals that the defendant no. 1 had obtained a cash credit facility of
Rs. 4 lacs for the purpose of expansion of business. It is also pertinent
to mention here that the defendant no. 1 is sole proprietor of the M/s
Amit Shop.
1 Section 128 of The Indian Contract Act, 1872
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36. In
Ladymoon Towers (supra), one of the cases relied
upon by the defendant no. 3, Hon’ble Calcutta HC had discussed the
definition of traders. It was observed that trader is one who buys goods
and sells them at profit. The relevant observation is as follows:
“Traders: The commonly accepted definition of a
"trader" is one who trades in goods, buys goods
and sells them at a profit. Black's Law Dictionary,
Eighth Edition, also defines a trader as one who
sells goods substantially in the form in which
they are bought or as a member of a stock
exchange, buys and sells securities on the
exchange floor or one who buys and sells
commodities and commodity futures for others or
for his / her own account in anticipation of a
speculative profit.”
Thus, on the basis of above observation, it can be said
that defendant is a trader as he buys and sells the good for profit and
that he had availed the cash credit facility for expansion of the said
business. On the other hand, it is admitted that plaintiff is a bank and is
covered under definition of bankers u/s 2(1)(c) of the Act.
37. Since the dispute between the plaintiff and the defendant
no. 1 is a commercial dispute and liability of defendant no. 3 is co-
extensive with that of principal debtor thus, the contention of the
defendant no. 3 that the suit is not a commercial dispute is not
maintainable.
38. The counsel for the defendant no. 3 has argued that suit
against the defendant no. 3 was filed in capacity of guarantor, thus, the
defendant no. 3 is not a necessary party. However, this argument is not
acceptable. Once the defendant no. 3 admits that he stood as guarantor
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and also executed a guarantee deed in favour of defendant no. 1, his
liability becomes co-extensive to that of principal debtor and is
considered as necessary party.
39. Moreover, the defendant has argued that the jurisdiction
of the commercial court is hit by Section 34 of SARFAESI Act r/w
Section 11 of the CC Act as the jurisdiction to adjudicate the dispute
lies with DRT. However, this contention is not sustainable as the
minimum value/amount of the suit should be Rs. 20 Lacs in order to
be adjudicated by DRT. In this regard, a notification dated 06.09.2018
was published by the Government of India. The said notification is as
follows:
“NOTIFICATION
New Delhi
the 6th September, 2018 8.0. 4312(E).
Whereas, sub-section (4) of section 1 of the Recovery of
Debts due to Banks and Financial Institutions Act, 1993
( 51 of 1993) provides that the provisions of the said Act
shall not apply where the amount of debt due to any
bank or financial institution or to a consortium of banks
or financial institutions is less than ten 1akh rupees or
such other amount, being not less than one 1akh rupees,
as the Central Government may, by notification, specify;
And whereas, the Central Government has considered it
necessary to raise the pecuniary limit from ten 1akh
rupees to twenty 1akh rupees for filing application for
recovery of debts in the Debts Recovery Tribunals by
such banks and financial institutions. Now therefore, in
exercise of the powers conferred by sub—section (4) of
section 1 of the Recovery of Debts Due to Banks and
Financial Institutions Act, 1993, the Central Government
hereby specifies that the provisions of the said Act shall
not apply where the amount of debt due to any bank or
financial institution or to a consortium of banks or
financial institutions is less than twenty 1akh rupees.
[F. No. 3/4/2018—DRT]
SUCHINDRA MISRA, Jt. Secy”
Thus, the contention of the defendant is not acceptable
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being devoid of merits. On the basis of the statement of account
Ex.PW1/20, it is established that there is an outstanding amount of
Rs.5,07,308.60/- as on 30.11.2023. This amount includes an unapplied
interest for an amount of Rs.1,33,233/- and the principal amount on this
as on date of NPA is Rs.3,74,075/-. The plaintiff, thus, is entitled to an
amount of Rs.5,07,308.60/- as principal.
Issue no. (i) is, accordingly decided in favour of plaintiff
and against the defendant.
Issue no. (iii) Whether the plaintiff is entitled to any interest? If
so, at what rate and for which period? OPP.
40. The onus to prove this issue is upon the plaintiff. It
has been proved on record that a Cash Credit Facility of Rs.4,00,000/-
was granted on 29.11.2017 vide sanction letter Ex.PW1/5 (colly) and
thereafter, funds was disbursed to defendant vide loan account bearing
no. 0287020100002837.
41. Plaintiff has claimed unapplied interest upto 30.11.2023
for a sum of Rs.1,33,233/- as per books of accounts maintained by it.
Plaintiff has also included the interest in the amount claimed in the
plaint upto 30.11.2023.
42. Section 34 of the Code of Civil Procedure, 1908 deals
with award of interest by the Court in suits for money. It reads as
follows:
"34. Interest
(1) Where and in so far as a decree is for the payment
of money, the Court may, in the decree, order interest
at such rate as the Court deems reasonable to be paid
on the principal sum adjudged, from the date of the
suit to the date of the decree, in addition to any
interest adjudged on such principal sum for any
period prior to the institution of the suit, with further
interest at such rate not exceeding six per cent, per
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annum, as the Court deems reasonable on such
principal sum, from the date of the decree to the date
of payment, or to such earlier date as the Court thinks
fit.
Provided that where the liability in relation to the sum
so adjudged had arisen out of a commercial
transaction, the rate of such further interest may
exceed six per cent, per annum, but shall not exceed
the contractual rate of interest or where there is no
contractual rate, the rate at which moneys are lent or
advanced by nationalized banks in relation to
commercial transactions.”
43. Section 34 empowers the court to award interest for the
period from the date of the suit to the date of the decree and from the
date of the decree to the date of payment where the decree is for
payment of money.
44. Section 34 CPC does not empower the court to award
pre-suit interest. The pre-suit interest would ordinarily depend on the
contract (express or implied) between the parties or some statutory
provisions or the mercantile usage, as held by Hon'ble Supreme Court
in Secretary/General Manager, Chennai Central Co-operative Bank
Ltd. Vs. S.Kamalaveni Sundaram 2011 (99) A/C 140 (SC).
45. As far as interest, pendent-lite and future is concerned,
plaintiff has not claimed any specific rate of interest in the prayer clause
at which pendent-elite and future interest is claimed since 01.12.2023
till its realisation. Neither any document was pointed out by the
counsel for plaintiff during arguments mentioning the rate of interest
at which pendent-elite and future interest is claimed. Interest of justice
would be served if defendant is directed to pay interest @ 9% per
annum on the abovesaid principal amount. Thus, it is directed plaintiff
is entitled to Rs.5,07,308.60/- (includes the unapplied interest) as
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principal against abovesaid loan account alongwith interest @ 8% from
01.12.2023 till its realization on the principal amount of Rs.5,07,308.60/-.
Issue no. (ii) is thus, decided in favour of plaintiff and
against the defendant, accordingly.
ISSUE No. (iii)/Relief :
46. In view of findings on the above issue, the suit of the
plaintiff Bank is hereby decreed in its favour and against the defendant
for a principal amount of Rs.5,07,308.60/- towards the loan account
bearing no. 0287020100002837 along with interest @ 9% per annum
on the principal amount of Rs.5,07,308.60/- w.e.f. 01.12.2023 till its
realisation. Costs of the suit to the extent of court fees and Rs.25,000/-
as litigation cost are also awarded to the plaintiff as per law. The
plaintiff has not paid the court fees on the pre-suit interest claimed
from 30.11.2023 till date of filing of the suit i.e. 17.05.2024. It is,
thus, directed that the decree for the interest amount shall be
executable only subject to deposit of the court fees in respect of
interest amount.
Decree Sheet be prepared accordingly.
File be consigned to Record Room.
Announced in the open court (Kiran Bansal)
on 06.06.2025 District Judge, Commercial Court-02
Shahdara, Karkardooma
Delhi/ 06.06.2025
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