K SHAMSHEER KHAN v. KARNATAKA STATE FINANCIAL CORPORATION

THIS MFA IS FILED U/S 32(9) OF THE STATE FINANCIAL CORPORATIONS ACT, AGAINST THE ORDER IN MISC.NO.53/2002 ON THE FILE OF II ADDITIONAL DISTRICT & SESSIONS JUDGE, KOLAR, DISMISSING THE PETITION FILED U/S 31(1)(AA) AND (AA) OF STATE FINANCIAL CORPORATION ACT.

23.07.2007 PASSED THIS M.F.A. COMING ON FOR HEARING THIS DAY, N.K. PATIL J., DELIVERED THE FOLLOWING: :J U D G M E N T: This appeal is by the Karnataka State Financial Corporation being aggrieved by the orders dated

23.07.2007 passed in Misc.No.53/2002 on the file of the II Addl. District & Sessions Judge, at Kolar, dismissing the petition filed by the appellant.

2. It is case of the appellant-Corporation that, the 1st respondent approached the appellant- 3 Corporation for financial assistance of Rs.4.83 lakhs, i.e. 2.22 lakhs as term loan for building and acquiring plant and machinery and Rs.2.61 lakhs as working capital for establishing his silk reeling unit and the appellant sanctioned the said amount. The 1st respondent offered the personal guarantee of 2nd respondent, who is working in Canara Bank for due repayment of the loan sanctioned to 1st respondent. The respondents executed all the necessary documents in favour of the appellant and availed the loan. Accordingly, the 1st respondent got released a sum of only Rs.2.17 lakhs out of the term loan and Rs.2.61 lakhs the working capital as such the loan was restricted to Rs.4.78 lakhs. Right from the beginning the respondents were chronic defaulters and mis-utilized the loan amount and failed to run the industry properly and also they diverted the funds to other activities. Inspite of repeated requests and demands the 1st respondent did not repay the amount 4 due to the appellant. The unit was seized on

19.03.1996. After wide publicity in the daily newspapers twice, the unit was sold for Rs.1,51,000/- and the same was adjusted to the loan account. Further, the appellant has adjusted FD of Rs.20,000/- on 31.03.1997 to the loan account of 1st respondent. Under a notice dated 20.11.2011 appellant requested the respondents to clear the entire arrears. Though notice was issued by the appellant the respondents failed to comply with the terms of the said notice. A sum of Rs.16,84,390.90 inclusive of interest and other costs till 10.03.2002 with further interest as agreed is due from the respondents. The 2nd respondent by virtue of executing a deed of guarantee dated 16.11.1993 is jointly and severally liable to pay and discharge the entire debts U/S.31(1)(a) and (aa) of State Financial Corporation Act. On the above grounds, appellant had sought for an order against the respondents. 5

3. Upon service of notice the respondents, they represented through their counsel and filed objections contending that, the allegations made in the petition are all false and appellant is not entitled for any relief as prayed in the petition and it is barred by limitation; and they have not at all borrowed any loan from the appellant by executing any documents hence, the question of repayment of loan will not arise. On the above ground 1st respondent prayed for dismissal of the petition filed by the appellant- Corporation.

4. To substantiate its case, the appellant- Corporation got examined PW1, marked Exs.P1 to P7 and closed its side. Respondents did not adduce any evidence.

5. After hearing learned counsel appearing for both the parties, the trial Court has framed following necessary points consideration: 6

1. Whether the petitioner has proved that second respondent is the guarantor for the loan borrowed by first respondent? 2. Whether the petitioner has proved that second respondent is liable to pay the amount claimed in the petition?

3. Whether the petitioner can enforce the liability of second respondent?

6. After carefully hearing the learned counsel appearing for both the parties and on perusal of the oral and documentary evidence available on record, the trial Court has proceeded to dismiss the petition. Therefore, the appellant-Corporation is constrained to present this appeal.

7. The submission of the learned counsel appearing for the appellant at the out set is that, the Tribunal committed a grave error in not granting the prayer sought in the petition. The Tribunal dismissed the petition without appreciation of the oral and documentary evidence adduced by the appellant herein, whereas the respondent has not entered into 7 the witness box to substantiate the documents produced at Exs.P1 to P7 by the appellant that they are concocted and fabricated documents. To substantiate the same he placed reliance on the decisions of the Apex Court reported in AIR 1999 SC 1441 and 1999 AIR (SCW) 1129, where the party to the suit did not enter into the witness box and stated the facts pleaded in the written statement on oath in the trial Court and avoided the witness box so that he may not be cross-examined by the other side. The presumption would arises that the case set by him was not correct as has been held in series of decisions. Further, he pointed out presumption under Section 114 of evidence Act that the party who did not enter the witness box, the case of such parties cannot be considered. Further he placed reliance on decision of Apex Court reported in (2006) 8 Supreme Court Cases 322 in the case of Tulsi and Others v. Chandrika Prasad and Others 8 and pointed out at para 20 of the said judgment that Section 91 of the Evidence Act mainly forbids proving of the contents of a writing otherwise than by writing itself and merely lays down the “Best evidence rule”. It, however, does not prohibit the parties to adduce evidence in a case the deed is capable of being construed differently to show how they understood the same. Therefore, he submitted that, the impugned order passed by the Court below cannot be sustained and hence liable to be set aside.

8. After carefully considering the submissions of the learned counsel appearing for the appellant and on perusal of the relevant documents available on file including impugned order it is manifest on the face of the order, the Court below has committed an error and illegality in dismissing the petition on the basis of presumption assumption without consideration of the oral evidence of PW1 adduced by the appellant-Corporation and documentary evidence 9 produced at Ex.P1-Loan sanction communication letter, Ex.P2-Deed of guarantee, Ex.P2(a) and (b) signatures of 1st and 2nd respondent respectively, Ex.P3-Zerox notice, Ex.P4- Acknowlegement, Ex.P4(a)-Signature of N. Narayana, Ex.P5-Original legal notice, Ex.P6 Cover, Ex.P7- Accounts Extract, Ex.P7(a) signature of Deputy Manager and disbelieving all these documents maintained by the Corporation in toto, on the ground that the appellant has not made any efforts to recover the due amount from the respondents. It is specific case of the appellant that, it has sold the property of the respondents and adjusted Rs.1,51,000/- to the loan account borrowed by the respondents and also adjusted the FD amount of Rs.20,000/-. Thereafter they issued notice to the respondents, which was duly served to the respondents but they did not bother to take necessary steps to repay the entire amount. Further it is significant note the submission of the 10 learned counsel appearing for the appellant that, the Court below ought to have referred to the well settled law laid down by the Apex Court regarding Sections 114 and 91 of the evidence Act. The party knowing fully well, has failed to substantiate his case. Such persons are not entitled to claim any justice in the hands of this Court in view of the well settled law laid down by the Apex Court and this Court.

9. Tribunal ought to have gone to the root cause of the matter and decided the case strictly on the basis of the material available on file. Therefore, we are of the considered view that at any stretch of imagination, the impugned order cannot be sustained and it is liable to be set aside. Therefore, we do not express any further view in the matter as it requires reconsideration afresh.

10. In the light of the facts and circumstances of the case, appeal is allowed. The impugned order dated 23.07.2007 in Misc. No.53/2002 on the file of 11 the II Additional District & Sessions Judge, at Kolar is hereby set aside, matter stands remitted back to the Court below to reconsider and pass the order in accordance with law after following the decisions laid down by the Apex Court referred in the preceding paragraphs and after giving opportunity to both the parties to adduce evidence and dispose off the matter as expeditiously as possible, within a period of 6 months from the date of receipt of a copy of this judgment made available by the learned counsel appearing for the appellant. Office is directed to return the entire records to the trial Court immediately. JUDGE Sd/- Sbs* Sd/- JUDGE