M/s. Bank of BarodaAmbattur Branch v. Mr. B. Pappa Mudaliar2. The Registrar, DEBTS RECOVERY APPELLATE TRIBUNAL, Indian Bank

impugned order in R.A.No.48 of 2005 dated 03.01.2006 passed by thesecond respondent/Debts Recovery Appellate Tribunal and to quash thesame as arbitrary, unfounded in law, illegal etc.2. The second respondent/Debts Recovery Appellate Tribunalwhile allowing the R.A.No.48 of 2005 in its order dated 03.01.2006has inter alia opined that 'it is satisfied that the firstrespondent/appellant was a victim of circumstances, and his need forthe amount to discharge the loan incurred in his daughter's marriagewas exploited by the first defendant and the firstrespondent/appellant was made as a scape goat and the title deedswere handed over to Mr. N. Anand Sai with which certain documentswere created, about which the appellant was not aware and in fact,the defendant nos.3 to 5 have given complaints to the police aboutthe fraud committed by the first defendant with the connivance ofthe manager of the bank and that the first respondent/appellant alsogave such complaint to the police and the appellant was also calledupon for enquiry and that the manager of the respondent bank wasalso suspended, would go to show that there is some truth in thearguments advanced on behalf of the appellant, that his signatureswere obtained in blank papers without even explaining contents ofthe documents and those peculiar circumstances make one has tobelieve the case of the first respondent/appellant is true and inthe said view of the matter, it is inclined to accept the case ofthe appellant/first respondent that he was a victim of thecircumstances and that he did not offer himself or his property as asurety for the loan requirements of the first defendant but however,the first respondent/appellant was liable to pay the admitted amountof Rs.2 lakh together with interest thereon etc., and resultantlyhas come to the conclusion that the first respondent/appellant hadborrowed Rs.2 lakhs until which he is liable to pay simple interesttogether at 12% per annum from the date of borrowing and RecoveryCertificate could be issued on the said amount and directed the writpetitioner/Bank to file a revised statement of accounts before theDebts Recovery Tribunal calculating interest at the contractual rateon Rs.2 lakhs from the date of borrowing, up to the date of filingof the original application and at the rate of 12% simple interestfrom the date of filing of the original application till03.01.2006, i.e., the date of order of the Appellate Tribunal aftergiving credit to the amounts paid by the appellant i.e. Rs.4.78lakhs and serve a copy of the same to the appellant, within 3 weeksfrom the date of receipt of the said order and the Debts RecoveryTribunal shall issue a fresh Recovery Certificate for the saidamount and that the first respondent/appellant shall pay the amount,as shown in the revised statement of accounts, within 4 weeks fromthe date of receipt of the revised statement, failing which theamount shown as due in Recovery Certificate will carry simpleinterest at the rate of 12% p.a. from 03.01.2006 till the date ofrealisation and thus modified the order of decree passed by theDebts Recovery Tribunal-I, Chennai. https://hcservices.ecourts.gov.in/hcservices/

3. The learned counsel for the writ petitioner/Bank submitsthat the impugned order in R.A.No.48 of 2005 dated 03.01.2006 of thesecond respondent/Debts Recovery Appellate Authority is illegal andan arbitrary one since the same has been passed brushing aside thetangible evidence available on record in the case and withoutconsidering the pleadings and documents and the circumstances placedbefore the Debts Recovery Tribunal-I, Chennai and that the impugnedorder, passed by the second respondent/Debts Recovery AppellateAuthority, suffers from serious legal infirmities inasmuch as thesame having been passed contrary to the provisions of law and as amatter of fact, the second respondent/Debts Recovery AppellateAuthority has considered extraneous circumstances to arrive at aconclusion and allowed the appeal of the first respondent/appellanterroneously and moreover, the first respondent/appellant insubstance agreed that he has offered his property as mortgage forthe facility availed by the borrower and has executed the documentsand the contention of the first respondent/appellant that he hasnot been aware of the purpose for which the documents have beenexecuted is unsustainable in the eye of law and such a plea cannotbe countenanced in law against the documentary evidence and indeedthe finding rendered by the second respondent/appellate authoritythat the third party guarantors are victims of an alleged fraudcommitted by the borrower for availing the loan facility is neitherbased on any valid evidence nor any legal proceeding has initiatedby the third party guarantors against the borrowers for the allegedfraud, if any, and significantly, the execution of the loandocuments viz., Deed of Guarantee in favour of the petitioner/Bankis not in dispute and it is neither the contention nor the findingof the Debts Recovery Tribunal-I, Chennai that the writpetitioner/Bank was also party to the alleged fraud and in short thesecond respondent/appellate authority should not have allowed theappeal based on surmises and untenable contentions raised at theappellate stage and also that the first respondent/appellant hasgiven complaint to the police after the final order has been passedby the Debts Recovery Tribunal-I, Chennai, and if at all the firstrespondent/appellant has been defrauded, it is for him to proceedagainst the borrower and the conclusion of the secondrespondent/appellate authority that the first respondent/appellantis liable to pay only a sum of Rs.2 lakhs with interest etc., isvery much against the documentary evidence which stands proved onthe admission of the first respondent/appellant and the same isagainst the contractual obligation of the first respondent/appellantto the writ petitioner/Bank and that apart, the secondrespondent/appellate authority based on the documents produced bythe writ petitioner/Bank and on the basis of the agreements producedby the first respondent/appellant said to have been entered intobetween him and the borrowers should have held that the firstrespondent/appellant stood as guarantor for the loan facilityavailed by the first defendant and mortgaged his property and https://hcservices.ecourts.gov.in/hcservices/ deposited his title deeds and in short these aspects of the matterhave not been either adverted to, or appreciated by the secondrespondent/appellate authority in a proper perspective which hasresulted in miscarriage of justice and therefore, prays for allowingthe writ petition in furtherance of substantial cause of justice.4. Per Contra, the learned counsel for the first respondentsubmits that the petitioner/Bank has sanctioned a term loan ofRs.7.40 lakhs and a packing credit of Rs.4 lakhs to one Mr. AnandSai, Proprietor of M/s. Maruthi Electronics, having units one atB20, Mugappair Industrial Estate, Chennai-50 and another at 263/2,Vanagram, Ambattur Industrial Estate, Chennai-58 on 28.09.1992 andfor this loan one Mr.S. Murugesh, V.Loganathan and Smt. P.Rajalakshmi stood as guarantors and on 11.10.1993, thepetitioner/Bank has sanctioned the term loan of Rs.17.60 lakhs toMr. Anand Sai and two term loans have been availed by Mr. Anand Saiwith the petitioner/Bank and when the first respondent approachedMr. Anand Sai of M/s. Maruthi Electronics through one Mr. Murali, aneighbour, for financial help the said Mr. Anand Sai has agreed toarrange loan from the petitioner/Bank provided the first respondentgives his property as collateral security and the first respondenthas agreed to give his house property as collateral security for theloan to be availed and therefore, they have entered into anagreement to that effect on 02.09.1993 and the first respondent hashanded over the original title deeds of his house property and otherpapers to Mr.Anand Sai on that day itself and that Mr. Anand Saihas interm handed over the same to the petitioner/Bank and on11.10.1993 the first respondent along with Mr. Anand Sai went to thepetitioner/Bank and the bank manager obtained the first respondent'ssignature in some documents which were blank at that time and afterobtaining the signature, the first respondent/manager of the bankhas given Rs.1.90 lakhs and informed that a sum of Rs.10,000/- hasbeen taken as commission for sanctioning the loan and in all a sumof Rs.2 lakhs has been given as loan to the first respondent andthat the manager has informed that the loan has to be repaid withina period of 3 years and to the shock and surprise of the firstrespondent, he came to know that he stood as a guarantor for theloan availed by Mr. Anand Sai to the petitioner/Bank and that henever knew that he stood as a guarantor for Mr. Anand Sai and thattaking advantage of the position of the first respondent, Mr. AnandSai with the connivance of the petitioner/Bank manager has committeda fraud and that the first respondent has been made as scape goatand that the first respondent has not received any notice from thepetitioner/Bank before filing of the case to recover the amountagainst Mr. Anand Sai and other guarantors and that thepetitioner/Bank has filed O.A.No.41 of 1997 before the DebtsRecovery Tribunal-I, Chennai to recover the amount due to themagainst Mr. Anand Sai and others and all the guarantors have taken aplea that they are innocent, victim of circumstances and that theywere unaware that they stood as guarantors for the loan availed by https://hcservices.ecourts.gov.in/hcservices/ Mr. Anand Sai with the petitioner/Bank.5. Further, it is the contention of the first respondent/7thdefendant that as a matter of fact O.A.No.41 of 1997 has beenallowed by the Debts Recovery Tribunal-I, Chennai holding that thepetitioner/Bank is entitled to the Recovery Certificate againstDefendant Nos. 2,6 and 7 and discharge the defendants 3 to 5 fromthe liabilities as they have paid the claim amount and however, thefirst respondent has lodged a criminal complaint with CBI Chennai,against the petitioner's bank manager and Mr. Anand Sai and that hehas been enquired by the CBI on 06.06.2005 and the first respondenthas preferred R.A.No.48 of 2005 before Debts Recovery Tribunal,Chennai and the said appeal has been allowed with an observationthat the first respondent was never informed, either by theprincipal Debtors or by the bank manager that a signature has beentaken as guarantor for the loan availed by the first defendant andthe signature of the first respondent has been obtained by playingfraud and misrepresentation and dissatisfied with the orders of thesecond respondent/appellate tribunal, the petitioner/Bank has filedthe present writ petition and added further, the petitioner/Bank hasnot challenged the observation of the Debts Recovery Tribunal madein para 15 of the order passed in O.A.No.41 of 1997 dated 31.12.2004and even in the present writ petition the said observation of theDebts Recovery Tribunal has not been challenged.6. Continuing further, the learned counsel for the firstrespondent contends that the petitioner/Bank has not discharged theburden of proof and the petitioner/Bank has not pointed out as tohow the order of the second respondent/appellate tribunal suffersfrom various legal infirmities and also it is relevant to point outthat the alleged deposit of title deeds was not made when the firstrespondent was present in the bank along with Mr. Anand Sai and assuch, the first respondent is not aware of the deposit of titledeeds with the bank and in short, the learned counsel for the firstrespondent supports the order of the second respondent/appellatetribunal in all aspects and prays for dismissal of the writpetition.7. It is relevant for this Court to point out that the writpetitioner/Bank has filed O.A.No.41 of 1997 as an applicant beforethe Debts Recovery Tribunal-1, Chennai as against 1 to 8 Defendantsmentioned therein and the first respondent herein by name Mr. B.Pappa Mudaliar was arrayed as seventh defendant and the said AnandSai was arrayed as the first defendant in the said O.A.No.41 of1997. The Tribunal, has passed a final order on 31.12.2004, theoperative part is extracted hereunder;"(a) The applicant bank is entitled for a RecoveryCertificate against defendants 1,2,6 & 7 for recovery of asum of Rs.55,55,830.66p in respect of Term Loan – II,Packing Credit and OD facilities from the date of OA till https://hcservices.ecourts.gov.in/hcservices/ the date of application with future interest @ 17% p.a.(seventeen percent simple interest) from the date ofapplication till the date of realization with legal costsof the OA.(b) Defendants 3 to 5 are discharged from their loanliability as they have paid the OA claim amount ofRs.9,10,771/- during the course of the proceedings.Hence, the Registry of this Tribunal is directed torelease the original title deeds pertaining to D3 to D5directly, within four weeks from the date of this finalorder, through their counsel, after obtaining necessaryacknowledgment and undertaking from them under intimationto the applicant bank.(c) It is further declared that in case of default ofpayment by the defendants 1,2,6 and 7 the applicant bankis at liberty to sell the other OA schedule properties andto adjust the sale proceeds towards the amount due.(d) If the sale proceeds are not found sufficient afterdefraying the expenses of such sale for the payment of allsuch amounts, the defendants 1,2,6 and 7 are jointly andseverally liable to pay the amount of such deficiency withinterest mentioned above until realisation and also fromtheir assets in addition to the OA scheduled properties.(e) As regards the D8 is concerned, the D8 is only aproforma defendant and no claim is made against it" withsuch findings the Tribunal has directed the issue ofRecovery Certificate accordingly.8. It is also proper at this juncture to mention that the DebtsRecovery Tribunal-I, Chennai in its final order in O.A.No.41 of 1997dated 31.12.2004 in para 12 has observed as follows;"It is also a matter of record that in this matter theD1,D2,D7 and D8, although filed their written statements,but failed to file any Counter Proof Affidavit against theproof affidavit of the bank and in fact they are notcontesting the case since then. The D1, D2, D6, D7 and D8also did not cross examine the bank witness nor filed anyrebuttal documents to oppose the OA claim of the bankagainst them or to substantiate the defense taken by themin their written statement. In this matter, the D8, theState Bank of India, is only a proforma party. Hence, nocontra evidence is available in the record against theloan liability of the D1,D2,D6 and D7 are concerned in thepresent OA claim."9. Continuing further, the Debts Recovery Tribunal-I, Chennaihas observed the following at paras 15 and 16 of its final order inO.A.No.41 of 1997 which runs thus;"15. By perusal of this averments and the admission of thedefendants 3 to 5, I feel that these defendants have not https://hcservices.ecourts.gov.in/hcservices/ disputed the originality of their signatures over the deedof guarantee and they have further impliedly admitted thatthey had voluntarily handed over their title deeds to theD1 for seeking private finance from him only and thesetitle deeds were allegedly misused by the D1 for availinga personal loan facility from the applicant bank byproducing them as guarantors without their expresswillingness and necessary consent. Further the D3 to D5did not give sufficient evidence that what compelled themto go with the D1 to the bank office and to sign somepapers without knowing the contents thereof and withoutknowing the implications of the same. If they were reallyinnocent people, they should not have surrendered theirtitle deeds with the bank officials or to Mr. Anand Sai,until and unless they were fully explained about the termsand conditions stipulated in the documents signed by themand without agreeing for the same. They did not make anycomplaint before the higher authorities of the bank thatthey were cheated or exploited by the D1 by producing themas a guarantor. They also failed to write any protestletter to the higher authorities of the bank or any higherpublic authorities and they are raising this issue onlyfor the first time before this Court.16. By perusal of their Counter Proof Affidavits andthe documents annexed therewith, it is evident that theyadmittedly have taken some loan from Mr. Anand Sai, andthat is why they voluntarily handed over their title deedsto him. In these circumstances, this Court cannot holdthat the dendants 3 to 5 are fully strangers to thepresent loan transaction and only it can be inferred thatperhaps they were cheated only. Perhaps the D1 misusedhis position and exploited them and they can be presumedas a victim for the alleged fraud committed by the D1 foravailing the loan facilities for himself and for usingthem as guarantor. But the bank cannot be found faultwith such act as the bank is also equally sufferer as theloan amount remains unpaid. Moreover, they have alreadydeposited the OA claim amount in respect of the Term Loan-I. Hence, it can be held that the bank has producedsufficient proof that the defendants 3 to 5 visited theoffice of the bank, signed the deed of guarantee for theTerm Loan-I voluntarily and also deposited their titledeeds with the bank through the D1 for the purpose ofcreating equitable mortgage. Hence, the OA claim for theTerm Loan-I can very well be decided against thedefendants 3 to 5. However, it is also a matter of recordthat the bank has already received the full OA claimamount of Rs.9,10,771/- under the Term Loan-I as on thedate of filing of the OA during the course of theproceedings in this Court and this amount is being kept by https://hcservices.ecourts.gov.in/hcservices/ the bank under the no-lien interest bearing account andthe bank has not materialize the compromise. The bank, atthe most is entitled for only pendente-lite and futureinterest on this Term Loan-I from theguarantors/defendants 3 to 5 which is the domain anddiscretion of this Court."11. That apart, the Debts Recovery Tribunal-I, Chennai has alsocome to the conclusion that the defendants 3 to 5 have taken seriouspains for settling this matter and also deposited an amount towardstheir loan liabilities in installments with a hope that a one timesettlement with the bank and therefore, they deserve some sympathyfor awarding pendente-lite and future interest. It has also beenfurther held that the pendente-lite and future interest is to berestricted to the extent of the interest accrued on the amountdeposited by D3 to D5 which is already kept in the interest bearingno-lien account of the applicant bank and the bank may appropriatethis amount towards the loan liability of the Term Loan-I and in theresult, the OA claim in respect of Term Loan-I stands fullysatisfied and ultimately the guarantors/defendants 3 to 5 standsfully discharged under the Term Loan-I and the bank was directed toreturn their original title deeds to them immediately etc.Moreover, the Debts Recovery Tribunal has also held that the writpetitioner/Bank is entitled for 17% simple interest onRs.55,55,830.66p in respect of Term Loan-II, Packing Credit and ODfacilities against the defendants 1,2,6 and 7 from the date offiling of OA till the date of realisation with costs of the presentproceedings.12. A perusal of the O.A.No.41 of 1997 (as seen from the typedset of papers filed before this Court) presented before the DebtsRecovery Tribunal-I, Chennai shows that the writ petitioner/Bank isthe applicant and there are totally 8 persons who are arrayed asdefendants including the first respondent as the 7th defendant.13. At this juncture, this Court pertinently points out thatthe 7th defendant in O.A.No.41 of 1997 before the Debts RecoveryTribunal-I, Chennai has figured as an appellant in R.A.No.48 of 2005before the second respondent/Debts Recovery Appellate Tribunal,Chennai and the writ petitioner/Bank has been shown as the onlyrespondent to those proceedings and conspicuously , D1 to D6 and D8namely State Bank Of India, Siru Thozhil Branch, Nungambakkam,Chennai-34 have not been shown as parties to the proceedings inR.A.No.48 of 2005 before the second respondent/tribunal.14. In this connection, we deem it appropriate to make arelevant mention that persons who are necessary parties to theoriginal application in O.A.No.41 of 1997 are also the necessaryparties to R.A.No.48 of 2005. If necessary parties are not shown asparties in R.A.No.48 of 2005, then the R.A.No.48 of 2005, as framed https://hcservices.ecourts.gov.in/hcservices/ by the first respondent/appellant, showing only the writ petitionerbank as respondent, is not a properly framed one. Furthermore, ifnecessary parties are not joined in a particular proceeding before acompetent authority, then, the order passed will be a nullity andhas no binding effect. To bring a person as a party defendant isnot a substantive right, but one of procedure and a Court/Tribunalhas discretion in its proper exercise. In a writ of certiorari notonly the Tribunal or Authority whose order is sought to be quashedbut also the other parties in whose favour the said order is issuedare necessary parties.15. Indeed, the non-joinder of defendant nos.1 to 6 and 8 inO.A.No.41 of 1997 as necessary parties to the proceedings inR.A.No.48 of 2005 before the second respondent/Debts RecoveryAppellate Tribunal is an infirmity. After all, parties are added ina pending proceeding before an appropriate forum to avoid pluralityof proceedings. Also, it is to be borne in mind that the basicprinciple is that an individual is made a party in an originalproceedings because there is a cause of action against him, and whencauses of action are joined, the parties are also to be joined. Ifan enforceable right of persons are to be affected or likely to beaffected, then, they must be influenced as necessary or properparties as the tribunal deems fit and proper based on the facts andcircumstances of a given case.16. In the case on hand, it is useful to refer to the prayermade by the writ petitioner/Bank in O.A.No.41 of 1997 on the file ofthe Debts Recovery Tribunal-I, Chennai therein the bank has soughtfor a judgment and certificate (in the nature of decree) to beissued to the Recovery Officer against the respondent nos.1 to 7therein jointly and severally, directing the Recovery Officer torecover from them the following;"(a) The sum of Rs.34,88,754/- (due under Term Loan-I andTerm Loan_II) with the liability of Respondents 2 to 5being limited to the sum of Rs.9,10,771/- (due under theTerm Loan-I) with future interest thereon at the rate of20.75% per annum with quarterly rests from 23.08.1995,(the date of Plaint) till the date of realisation in full;(b) for the sum of Rs.26,02,717 (due under Packing CreditII) with the liability being limited to Respondents 1, 6and 7 only) with future interest thereon at the rate of20.25% p.a., with quarterly rests from 23.08.1995, (thedate of Plaint) till the date of realisation in full;(c) for costs of the proceedings (in proportion to theliabilities of the Respondents) and granting such furtheror other reliefs; (d) By sale of the properties described in the ScheduleA,C,E,G,I,K and L hereunder by auction sale andapplication (after defraying the sale expenses therefrom),of the Sale proceedings towards the Principal, interest https://hcservices.ecourts.gov.in/hcservices/ and costs in that order towards payment of the amountsclaimed in (A) and (D) supra;(e) by attachment and sale of other properties, bothmovables and immovable of the Respondents and applicationof the sale proceeds towards the aforesaid amounts due;(f) recover from the 9th Respondent the amount realised byit if any, by sale of the machinery seized by theAdvocate-Commissioner appointed in application No.3379 of1995 in C.S.No.1059 of 1995 on the file of High Court ofMadras, as well as Application No.3581 of 1995 inC.S.No.1060 of 1995 transferred to and pending on the fileof the 5th Additional City Civil Court as O.A.No.394 of1996." 17. The writ petitioner/Bank in its O.A.No.41 of 1997 hasaverred that the first respondent therein approached the bank forcredit facility in regard to his improvement in his business andthat the bank sanctioned the Term Loan of Rs.7.40 lakhs in September1992, carrying interest at the rate of 9.75% p.a., over Bank ratethe minimum being 19.75% p.a., inclusive of 0.75% pa., interest taxand with 2% penal rate all with quarterly rests and packing creditof Rs.4 lakhs also has been sanctioned and it has been repaid and toavail a facility of Term Loan, the respondents in O.A.No.41 of 1997have executed the following documents on 28.09.1992.1) A promisory note for Rs.7.40 lakhs by the first respondent.2) A letter of Installments for Rs.7.40 lakhs by 1st respondent.3) An instrument of Hypothecation of moveable property by the firstrespondent and that the respondent nos.2 to 7 have executed generalforms of guarantee. 18. The respondents 2 to 7 executed General Forms of guaranteeand are the guarantors and also on 11.10.1993, second Term Loan ofRs.17.60 lakhs and Additional Packing Credit of Rs.30 lakhs weresanctioned and the former carries interest at the rate of 7% p.a.,over bank rate the minimum being 19.75% p.a., inclusive of 2% penalrate and with 0.75% interest with quarterly rests and the lattercarries interest at the rate of 1% p.a., over bank rate the minimumbeing 13% p.a., inclusive of 2% penal rate with quarterly rests andthe following documents were executed.A. In respect of II Term Loan:-(a) A promissory note for Rs.17.60 lakhs by the 1st respondent.(b) A letter of installments by 1st respondent.(c) a refinance agreement by first respondent.(d) An instrument of Hypothecation of movable machinery by firstrespondent, and(e) An instrument of Hypothecation of machinery by the firstrespondent.B. In respect of II Packing Credit(a) A promissory note for Rs.30 lakhs by the first respondent. https://hcservices.ecourts.gov.in/hcservices/ (b) A letter of undertaking for paying penal interest by the firstrespondent.(c) A letter of Undertaking for packing credit advance by firstrespondent.(d) An instrument of Hypothecation of goods by first respondent.(e) A trust receipt (Export) by first respondent.19. The 6th and 7th respondents executed general forms ofguarantees and are guarantors in respect of these loans and theinterest charged on packing credit advances was debited in currentaccount, thereby creating an over draft and the first respondenthypothecated all the machinery goods including raw materialsdescribed in the schedule hereunder and the plaintiff has the firstcharge over the same and the 8th respondent has been impleaded as aparty to this suit as the 1st respondent has again hypothecatedschedule – C properties to the 8th respondent and has at the mostonly a second charge on the same and moreover, with an intent tofurther secure the due repayment of the amounts due under thefacilities to be granted to the first respondent, the defendants 3,4 and 5 deposited on 26.09.1992 with the applicant at Madras at itsPurasawalkam Branch Office, the title deeds listed in schedules B,Dand F described in Schedules A, C and E of the application and alsolater with an intent to secure the due repayment of the entireamount due under all the loans payable to applicant by therespondents 1,6 and 7 deposited with the applicant/bank on03.09.1993 at Purasawalkam branch at Madras their title deeds listedin Schedules H and I respectively of the properties mentioned and ason date of filing the suit on 23.08.1995 the amounts mentionedhereunder are liable to be paid in respect of the loan accounts ofthe writ petitioner/Bank by the first respondent as principaldebtors and respondents 2 to 7 as guarantors and the interest ofpacking credit has been debited in current account and has beentreated as over draft and amount due is as follows;Nature of FacilityRate of InterestAmount due as on dateRs. P(i) Term Loan I20.75% p.a. 9,10,771.00(ii) Term Loan II -do-25,77,983.00(iii)Packing Credit II17% p.a.26,02,717.00(iv)Overdraft in Current Account20.25% p.a. 3,55,130.66 --------------- 64,46,601.66Total Amount Rs.64,46,601.66In short, the prayer of the writ petitioner/Bank in O.A.No.41of 1997 is that the respondents therein are liable to pay a sum ofRs.64,46,601.66 to it, which they have failed and neglected to pay. https://hcservices.ecourts.gov.in/hcservices/

20. Before the Debts Recovery Tribunal the first respondenttherein has filed a counter wherein among other things he has statedthat in September 1992, a term loan has been sanctioned forRs.7.40lakhs and a packing credit loan of Rs.4 lakhs with 25% aspromoters direct margin money and the P.C. Loan has been given on airrevocable letters of credit etc., and later, the writpetitioner/Bank has again sanctioned a second term loan of Rs.17.60lakhs and the second P.C. Loan for Rs.38 lakhs an irrevocable letterof credits on 11.12.1993 and Rs.6 lakhs worth of exports wereadjusted in the 2nd P.C. Loan etc., and finally the writ petitionerbank has closed the unit II at Vanagaram stopping manufacturing andrendering jobless for 45 persons and all the machinery's andmaterials were seized and were put under the custody of thepetitioner/Bank, resulting in a heavy loss to the promoterfinancially and if Unit is handed over to him, he will clear all thedues to the petitioner/Bank etc., and the loan repayment can berescheduled with a 6 months holiday period and the commencement ofexports and repayment will be regularised within a period of 6months and even he has approached BIFR for restarting the unit.21. The respondents 2 to 4, 6 and also 7 namely (firstrespondent in writ proceedings) have adopted the reply statementfiled by the first respondent for them also, as per the memo dated14.05.1997 filed by their counsel before the Debts RecoveryTribunal.22. It is quite apt to recall the observations made by theDebts Recovery Tribunal-I Chennai, at para 13 of its order dated31.12.2004 in O.A.No.41 of 1997 which runs hereunder;"The applicant bank witness, Mr. Sundareswaran, in hiselaborate proof affidavit dated 09.10.1997, hascategorically stated that the D1, Mr. Anand Sai, being asole proprietor of M/s. Maruthi Electronics, had borrowedsome money from the bank as mentioned in the OA, for whichthe defendants 2 to 7, have stood as guarantors. However,this witness has fairly conceded with this fact that theliability of the defendants 2 to 5 is limited only to theextent of Rs.9,10,771/- due under the Term Loan – I as onthe date of the filing of the OA. While for other creditfacilities, i.e., Term Loan – II. Packing Credit and OverDraft facilities, the defendants 1,2,6 and 7 are liable,as being the principal borrower and guarantor. No CounterProof Affidavit is filed by D1, D2, D6 to D7 to deny theirloan liability in respect of Term Loan – II, PackingCredit and Over Draft facilities, nor the D1, D2, D6 to D7have filed any rebuttal documents and to confront thedocuments produced and relied on by the bank to prove itsdebt and the OA claim against them (i.e. D1, D2, D6 andD7). Hence, I find that the applicant bank has well https://hcservices.ecourts.gov.in/hcservices/ established the OA claim against the D1, D2, D6 and D7 inrespect of Term Loan – II, Packing Credit and Over Draftfacilities and the bank is entitled for a RecoveryCertificate inclusive of contractual rate of interest tillthe date of filing of the OA and pendentelite and futureinterest as per this Order."23. The First Respondent/Appellant/ 7th Defendant beingaggrieved against the orders dated 31.12.2004 in O.A.No.41 of 1997passed by the Debts Recovery Tribunal -I, Chennai has preferredR.A.No.48 of 2005 before the second respondent/Debts RecoveryAppellate Tribunal, Chennai.24. The first respondent/appellant/ 7th defendant in hisR.A.No.48 of 2005 has, inter alia, averred that he has performed themarriage of his daughter, Shanti before 1993 and in connection withthe marriage of his daughter he has borrowed money from thirdparties for interest and in that year he has also planned toorganise the marriage of his second daughter, and therefore, he hasbeen in need of more money and at that point of time, he was servingas a welder in Avadi Tank Factory and has been earning aroundRs.400/- per month as basic salary and his wife was maintaining asmall diary and he was owning a house property in door No.1, CholanStreet, Charles Nagar, Pattabiram which has been valued at Rs.4lakhs at that time and hence, he has intended to borrow more moneyat lesser interest by mortgaging his house and thus he hasapproached one Mr. Murali, who has been residing in Charles Nagarand arranging loan to various persons from various sources and theappellant also approached him and requested him to arrange a loan ofRs.2 lakhs and that he has informed that there is an office inChennai which has been arranging loans at bank interest and thesaid office is having a tie up with the bank and that he demanded20% of the loan amount as commission and further informed that theinterest will be at 7% per annum, but he has to pay 5% more ascommission to the company and since he has agreed to the terms, thesaid Mr. Murali has taken him to Teynampet to a private office wherehe met the auditor, Mr. Srinivasan and in that place he also met Mr.Anand Sai, having a company in Ambattur and both Mr. Srinivasan andMr. Anand Sai obtained his signatures in many papers and forms andan agreement dated 02.09.1993 has also been executed between him andMr. Anand Sai (the first respondent in O.A.No.41 of 1997) and in thesaid agreement, it has been mentioned that he has received a loan ofRs.1.9 lakhs from Mr. Anand Sai and has to be repaid in three yearsand further, prior to the signing of the agreement, Mr. Murali hasinformed that some officials from the bank will visit his house andthey may require his signatures and some persons from Ambatturvisited his house in an Ambassador car as informed by Mr. Murali andobtained his signature in some papers. After about a month from thedate of the receipt of money by him, the said Mr. Murali hasinformed that he has to sign in some more papers in bank etc. https://hcservices.ecourts.gov.in/hcservices/

25. Continuing further, he has submitted that as informed byMr. Murali he has gone to the Bank of Baroda in Ambattur and met themanager and informed that Mr. Murali asked him to meet the managerto put his signatures in some papers and that the manager of theBank has not informed him about the purpose of his signatures andthe nature of transaction and the money involved and that he hasbeen under the impression that for the land of Rs.1.9 lakhs he gotfrom M. Anand Sai, there has been a tie up between Mr. Anand Sai andBank and for that loan and purpose, he has put his signature.Further, before he has visited the Bank and also Teynampet, he didnot know Mr. Anand Sai and he has no necessity to help Mr. Anand Saiin any way and while obtaining his signature, the manager has beenenquiring about his personal details and he has been furnishing hisdetails and at that point of time, the manager has taken hissignatures in many places and he has not known the details andcontents of the papers in which the signatures have been obtained.Subsequently, the said Mr. Anand Sai sent a letter to him requiringhim to pay an interest of Rs.34,200/- and he, by that time, hasarranged money and informed him that he will pay the entire balanceimmediately, and release his document, but the said Mr. Anand Sai(the first respondent in O.A.No.41 of 1997) has not respondedproperly and hence he later on has used the money for some otherpurpose, and therefore, he has received a notice from the DebtsRecovery Tribunal-I Chennai, and only upon receipt of such notice,he came to know that he has been cheated and that he has filed hisapplication before the Debts Recovery Tribunal-I, Chennai and he hasbeen hoping that he will be given an opportunity by the DebtsRecovery Tribunal-I, Chennai, by explaining his case by examinationof witness, but without examining him and also without providing hima reasonable opportunity to contest his case, the Debts RecoveryTribunal has decreed the O.A.No.41 of 1997 directing him to pay theentire claim amount.26. The substratum of the case of the firstrespondent/appellant/7th defendant is that he has not borrowed anymoney from the writ petitioner/Bank and he has obtained money onlyfrom Mr. Anand Sai (first respondent in O.A.No.41 of 1997) and allalong, he has been made to blelieve that he has been signing onlyfor the purpose of getting the loan from a private party and he hasbeen misled by the statement of Mr. Murali and others that there hasbeen a tie up with the said Mr. Anand Sai and some Bank and onlywith those statements the signatures has been obtained in somepapers.27. It is also the stand of the first respondent/appellant/ 7thdefendant that he has studied only up to VI Standard and does notknow English and the contents of the documents in which hissignatures have been obtained and the contents of which have not atall been explained to him and therefore, the documents cannot be put https://hcservices.ecourts.gov.in/hcservices/ against him and the burden of surety for the loan sanctioned to Mr.Anand Sai (first respondent in O.A.No.41 of 1997) cannot be fastenedupon him and under these circumstances, the decree dated 31.12.2004passed by the Debts Recovery Tribunal-I, Chennai in O.A.No.41 of1997 is not correct.28. One cannot brush aside an important fact that the 8thdefendant in O.A.No.41 of 1997 viz., State Bank of India, SiruThozhil Branch, Nungambakkam, Chennai-34, in its counter inO.A.No.41of 1997 before the Debts Recovery Tribunal-I, Chennai hascategorically stated that it has granted to the first respondent,Mr. Anand Sai, Proprietor of M/s. Maruthi Expanders, creditfacilities by way of Term Loan of Rs.4,98,000/- for purchasingmachinery and Cash Credit (Export Packing Credit) Limit ofRs.5,50,000/-, and the said credit facilities have been secured bymeans of pledge of scheduled machines and personal guarantee of Mrs.G. Saroja and Mrs. T.C. Yamuna Bai and mortgage of two immovableproperties belonging to Mrs. G. Saroja and Mrs.T.C. Yamuna Bai andthat further, it had filed suit in O.S.No.400 of 1996 on the file ofSub-Court, Poonamallee, which got later transferred to the DebtsRecovery Tribunal as T.A.No.1578 of 1997 for recovery of a sum ofRs.13,29,437.32 with future interest at 17% per annum with quarterlyrests from the date of plaint till the date of realisation withcosts and for sale of the plaint 'A' and 'B' schedule immovableproperties and also has prayed for the sale of schedule 'C','D' and'E' movable machinery and goods in the business of the firstdefendant subject to the claim of the writ petitioner/Bank as firstcharge holder and the tribunal has passed orders on 02.09.1999 inT.A.No.1578 of 1997 and therefore, has prayed for issuance of anorder recognising its rights as 'Second Charge Holder' subject tothe rights of the writ petitioner/Bank as First Charge Holderrelating to its schedule K & L machinery in the aforesaid originalapplication.29. It is not out of place to point out that as against the 8thdefendant namely, State Bank of India, Siru Thozhil Branch,Nungambakkam, Chennai-34, no relief has been claimed by the writpetitioner/Bank in O.A.No.41 of 1997 on the file of Debts RecoveryTribunal-I, Chennai.30. Before the second respondent/Debts Recovery AppellateTribunal, Chennai, the first respondent/appellant/ 7th defendant inURA.No. 15 of 2005 has filed an additional affidavit dated15.06.2005 mentioning that the writ petitioner/Banks Branch Manager,in collusion with the main accused Mr. Anand Sai, has fabricatedrecords as if many third parties and himself stood sureties for theloan raised by the said Mr.Anand Sai and thereby misappropriatedthe funds of the nationalised bank and since, the conduct of thebank officials attract the offence punishable not only under Section420 IPC but also under the Prevention of Corruption Act, he has https://hcservices.ecourts.gov.in/hcservices/ lodged a complaint, in writing,dated 17.03.2005, with the Central Bureau of Investigation, Chennaiand the Central Bureau of Investigation (Anti Corruption Branch) inChennai, has commenced its enquiry and issued him a summon dated24.05.2005 for his appearance before the Additional Superintendentof Police, Mr.V.A. Mohan at the earliest, and he has appeared beforethe CBI on 06.01.2005 and gave his statement and that he understandsthat CBI has taken steps to examine other witnesses also in thisregard.31. The stand taken by the writ petitioner/Bank is that thefirst respondent/appellant/ 7th defendant is liable to pay the loanamount sanctioned and paid to the (first defendant in O.A.No.41 of1997 on the file of Debts Recovery Tribunal-I, Chennai) because ofthe fact that the first respondent/appellant/ 7th defendant hasexecuted the guarantee agreement and other documents knowing fullythat he stands as a surety of the first defendant in O.A.No.41 of1997 and as such the first respondent/appellant/ 7th defendant isestopped from contending that the documents have been obtained fromhim by means of practicing fraud, misrepresentation etc.32. In the agreement entered into between the first defendantin (O.A.No.41 of 1997 namely Mr.N. Anand Sai) and the firstrespondent/appellant/ 7th defendant on 02.09.1993 it is mentionedthat the first defendant, Mr. Anand Sai is the sole proprietor ofMaruthi Electronics, having its registered office at B20 Mogapairwest Industrial Estate Ambattur, Madras-50 that he has approachedthe writ petitioner/Bank, Ambattur for enhancement of creditfacility for Maruthi Electronics, Bank of Baroda scrutinised theproposal and agreed to grant financial assistance, provided, heshould bring in collateral security of third party for the same andthat he has approached the first respondent/appellant/ 7th defendantand that the first respondent/appellant/ 7th defendant has agreed togive his property subject to the following terms and conditions forwhich both agreed mutually is as follows;"(1) The party of the first part should give a Loan ofRs.1,90,000/- to the party of the second part at the rateof 12% per annum and the same amount will be repaid by theparty of the second part at the end of third year that isat the time o party of the first party returning thedocuments to party of the second part.(2) The party of the first part has paid on this date asum of Rupees One Lakh and Five Thousand only by cash andbalance amount of Rupees Eighty Five Thousand will be paidat the time of party of the second part creating equitablemortgage with Bank of Baroda, Ambattur branch, the partyof the second part has also lodged his original titledeeds to Bank of Baroda.(3) The party of the second part is no way responsible forthe payment of Interest or principal to Bank of Baroda for https://hcservices.ecourts.gov.in/hcservices/ the Loan to be availed by Maruthi Electronics otherwisethe party of the second part is responsible only for thepayment of Rs. One Lakh Two Ninety Thousand Only alongwith the interest at the rate of 12%.(4) The party of the first part is solely responsible forreturning the document after redeeming the document fromBank of Baroda.(5) The whole transaction is mutually agreed by theparties only for the creation of equitable mortgage and itis also understood that the party of the first part willclear the title deeds within three years.(6) In case of the party of the first part not giving thedocument on time that is after three years to the party ofthe second part the party of the second party has got allthe right to claim from the party of the first part allthe damages, expenditure and market value of the propertyfor which the party of the first part has agreedspecifically. It is also understood that the time is theessence of this contract.(7) The party of the second party is also responsible forthe payment of interest @ 12% per annum quarterly on timeevery quarter without any delay, non payment of Intereston time the party of the first part is entitled to collectoverdue interest @ 5% over and above the normal interestand also the party of the first part has all the right tocollect the interest and overdue interest through theCourt of Law.(8) It is also the duty of the party of the second part tofurnish any papers connected with the title deeds if askedby the bank that is Bank of Baroda, and to sign therenewal/enhancement documents time to time required byBank of Baroda, Ambattur branch."33. Before the Debts Recovery Tribunal-I, Chennai thedefendants 1 to 6 and 8 have not cross-examined the Bank witnessesand they have also not filed any documents on their side to dislodgethe claim made in the original application against them and inshort, no endeavour has been made to substantiate their claim,projected in their response/written statement.34. When the clear cut fact situation is that the firstrespondent/appellant/ 7th defendant has not cross-examined the writpetitioner/Bank witnesses before the proceedings in O.A.No.41 of1997 on the file of Debts Recovery Tribunal-I Chennai, and alsothat he has not filed any counter proof affidavit repudiating theproof affidavit filed by the Bank, with respect, we are not inagreement with the conclusion arrived at by the secondrespondent/Debts Recovery Appellate Tribunal, Chennai to the effectthat "the First Defendant in O.A.No.41 of 1997 has misused hisposition by making use of the first respondent/appellant/ 7th https://hcservices.ecourts.gov.in/hcservices/ defendant and his title deeds and created the documents for loanobtained by him etc.," and the same is not based on the facts andcircumstances and also not borne out by available materials onrecord. As a matter of fact the liability of a surety iscoextensive with that of the Principal Debtor and the same isinstantaneous as per Section 128 of the Indian Contract Act 1872.At the cost of repetition, suffice it for this Court to point outthat the first respondent/appellant/ 7th defendant has arrayed onlythe writ petitioner/Bank as respondent in R.A.No.48 of 2005 beforethe Debts Recovery Appellate Tribunal, Chennai and has not arrayedDefendants 1 to 6 and 8 as necessary parties to those proceedings,especially when the relief prayed for by the writ petitioner/Bank inO.A.No.41 of 1997 before the Debts Recovery Tribunal-I, Chennai isfor issuance of Recovery Certificate against Defendants 1 to 7jointly and severally directing the Recovery Officer to recover fromthem the sum of Rs.34,88,754/- (due under Term Loan-I and TermLoan-II) with the liability of Respondents 2 to 5 being limited tothe sum of Rs.9,10,771/- (due under the Term Loan-I) with futureinterest thereon at the rate of 20.75% per annum with quarterlyrests from 23.08.1995, (the date of Plaint) till the date ofrealisation in full and for the sum of Rs.26,02,717 (due underPacking Credit II) with the liability being limited to Respondents1, 6 and 7 only) with future interest thereon at the rate of 20.25%p.a., with quarterly rests from 23.08.1995, (the date of Plaint)till the date of realisation in full etc., in the considered opinionof this Court. In short, we are of the earnest view that personsshown as necessary parties to O.A.No.41 of 1997 on the file of DebtsRecovery Tribunal-I, Chennai are necessary parties to the appealproceedings in R.A.No.48 of 2005 on the file of Debts RecoveryTribunal-I, Chennai so as to have a binding effect on all concerned.Otherwise, the R.A.No.48 of 2005 on the file of Debts RecoveryAppellate Tribunal Chennai, as framed by the firstrespondent/appellant/ 7th defendant and filed by showing only thewrit petitioner/bank as a respondent/party to the said proceedings,is not a properly framed one. Therefore, in the light of ourdetailed discussions mentioned supra and on an over all assessmentof the facts and circumstances of the case in a cumulative manner,we are inclined to allow this present writ petition and accordinglyallows this writ petition by setting aside the order of the secondrespondent/Debts Recovery Appellate Tribunal, Chennai passed inR.A.No.48 of 2005 dated 03.01.2006 to prevent an aberration ofjustice. Accordingly we remit back the R.A.No.48 of 2005 to theDebts Recovery Appellate Tribunal by directing the FirstRespondent/Appellant/ 7th Defendant to implead Defendants 1 to 6 and8 as necessary parties to R.A.No.48 of 2005 before the DebtsRecovery Appellate Tribunal Chennai, since they are the parties tothe proceedings in O.A.No.41 of 1997 on the file of Debts RecoveryTribunal-I, Chennai and the second respondent/Debts RecoveryAppellate Tribunal, Chennai is directed to deal afresh the R.A.No.48of 2005 on merits uninfluenced with any of the observation made by https://hcservices.ecourts.gov.in/hcservices/ this Court in this writ petition and to dispose of the same asexpeditiously as possible, after providing due opportunities to theparties concerned and also taking note of the fact that the FirstRespondent/Appellant/ 7th Defendant is reported to have paid a totalsum of Rs.4.78 lakhs as observed by the second respondent atparagraph 8 of its order in R.A.No.48 of 2005 dated 03.01.2006.35. In the result, the writ petition is allowed in the aboveterms. Considering the facts and circumstances of the case thereshall be no order as to costs.prmSd/-Asst. Registrar//True Copy//Sub Asst. RegistrarTo The Registrar,DEBTS RECOVERY APPELLATE TRIBUNAL,Indian Bank Building,Ethiraj Salai, Egmore,Chennai – 08.+ 2 ccs to M/s. Ramalingam Associates, Advocate SR No.69784+ 1 cc to Mr. V. Venkatasamy, Advocate SR No.70019BV(CO)SR/5.1.2010 Order inW.P.No.11358 OF 2006