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Indian Bank v. Textile Inland Agencies & Others
Factual and Procedural Background
This is a suit instituted by a Bank for recovery of loans granted to a partnership firm (the first defendant). The four partners of the firm are defendants Nos. 2, 3, 4 and 5. The first four defendants filed a joint written statement; the fifth defendant filed a separate written statement. The trial proceeded on eight framed issues. Evidence included bank documents admitted as Exhibit "A" (Judge's Brief of Documents) and a ledger-type document certified under the Bankers' Book Evidence Act as Exhibit "H". The Bank called a witness, Debasis Adhikary, who was not at the relevant branch at the material time, to prove signatures and entries. The Court evaluated the documentary and oral evidence and delivered a decree for the Bank with interest and costs, and corrected a misdescription of the fifth defendant's name in the plaint.
Legal Issues Presented
- Is the 5th defendant at all liable as a partner of the first defendant?
- Is the suit liable to fail against the 5th defendant for misdescription of Kamal Kano-ria as Kamal Kamania?
- Are the defendants liable to pay a sum of Rs. 1,63,773.59 as alleged in paragraph 8 of the plaint?
- Did the defendants admit or acknowledge their liabilities?
- Did the plaintiff fail and neglect to realise the dues from the Firms on whom the bills were raised within the period of limitation as alleged in paragraph 6 of the Written Statement and if so have the defendants lost valuable right therefor?
-
a) Did the defendants agree to pay interest at the alleged rates as contained in Schedule 'M' to the plaint or at any lower rate?
b) Are the rates of interest contrary to the Usurious Loans Act as alleged in paragraph 7 of the Written Statement? - Is the suit barred by limitation?
- To what reliefs, if any, is the plaintiff entitled?
Arguments of the Parties
Plaintiff's (Bank's) Arguments
- The Bank relied primarily on documentary evidence: Exhibit "A" (Judge's Brief of Documents), promissory notes, and Exhibit "H" (certified under the Bankers' Book Evidence Act) as proof of the amount claimed.
- The Bank pointed to admissions and acknowledgments by the defendants, including a letter dated 11-11-1982 admitting a principal amount (Rs. 13,063.73) and other letters of 1978–79, to show acknowledgment for limitation purposes.
- For interest pendente lite the Bank relied on authorities (Division Bench decisions cited) supporting that interest should ordinarily be granted at the contractual/agreed rate.
- The Bank asserted that the fifth defendant had executed a 1981 promissory note and was thus liable as a partner.
Defendants' Arguments
- Mr. Surana for the defendants contended that entries in the bank's books (Exhibit "H") alone, under S.34 of the Evidence Act, could not fix liability; he relied on the Supreme Court decision in Chandradhar Goswami (AIR 1967 SC 1058) for the proposition that some additional evidence beyond book entries is necessary to found a decree.
- On the Usurious Loans Act point the defence contended rates might be contrary to that Act (allegation in written statement).
- Regarding the fifth defendant, Mr. Surana raised a misdescription and also relied on the Division Bench judgment in Gouri Shankar (AIR 1959 Cal 262) to argue that if the partnership had substantially changed in nature, execution against the introduced partner could be improper.
- Various sections of the Negotiable Instruments Act (Ss. 30, 32, 93, 94 and 98) were referred to by defence counsel, although the Court noted the suit was not upon negotiable instruments.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Chandradhar Goswami, AIR 1967 SC 1058 | The proposition that entries alone in books of account are not, by themselves, sufficient to found a decree; some additional evidence is necessary. | The Court acknowledged the principle but found that in this case there was corroborative documentary and admission evidence (e.g., promissory notes, letters, Exhibit "A") so that the Bank's claim could be upheld despite reliance on Exhibit "H". |
| B. Gupta Tea Pvt. Ltd., AIR 1987 Cal at p. 64 | Support for the proposition that interest pendente lite may be granted at the rate agreed between parties. | The Court relied on this Division Bench decision (along with Art. Trend Experts) to justify awarding interest pendente lite at the contractual/minimum agreed rate where applicable. |
| Art. Trend Experts, AIR 1992 Cal at p. 12 | Support for awarding interest pendente lite at the contractual/agreed rate. | Used by the Court, together with B. Gupta Tea, to justify awarding interest pendente lite at the minimum contractual rate in the absence of relevant Reserve Bank circulars. |
| Nabin Chandra Deb, AIR 1928 Rangoon p. 7 | Illustrative authority on extreme circumstances under which a Court may infer substantial unfairness in loan transactions. | Cited by the plaintiff's counsel in connection with the Usurious Loans Act point; the Court noted these authorities but said it was unnecessary to enter into their facts here and found no evidence of substantial unfairness in the instant case. |
| Narendra Nath, AIR 1930 Calcutta p. 776 | Illustrative authority on when a Court may infer substantial unfairness in loan transactions. | Similarly cited for the Usurious Loans Act point; the Court referred to them for guidance but found the present facts did not show the requisite unfairness. |
| Gouri Shankar, AIR 1959 Cal p. 262 | Authority that execution against partnership property may be illegal where the firm exists only in name after a substantial or total change in partnership, so execution would affect persons other than those against whom decree was passed. | Relied upon by defence counsel. The Court distinguished the case on facts: it found no substantial or total alteration in the partnership here and therefore held the fifth defendant could not claim immunity from execution; Gouri Shankar did not aid the defence. |
Court's Reasoning and Analysis
The Court proceeded through a stepwise assessment of documentary and oral evidence, limitation, interest and statutory arguments, and partnership liability. Key points of the Court's reasoning follow:
- Proof of amount: Exhibit "H" was certified under the Bankers' Book Evidence Act. Although the Bank's witness (Mr. Debasis Adhikary) was not at the relevant branch at the material time, he proved several signatures on documents and Exhibit "H". The Court recognised the principle (from Chandradhar Goswami) that entries alone in the books may be insufficient, but found that here there was corroboration — promissory notes, other documentary material in Exhibit "A", and admissions — sufficient to found a decree. The Court observed there was no specific factual dispute about principal amounts or specific interest rates and that the defendants' factual defence was largely defect-finding.
- Corroboration and admissions: The Court relied upon documentary admissions, notably a letter of 11-11-1982 (in Exhibit "A") acknowledging a principal amount (Rs. 13,063.73) and letters of 1978–79 (items 14–16 of brief) which the Court treated as sufficient acknowledgments for both establishing liability and saving limitation as to the bills shown in Exhibit "H".
- Limitation: The discounted bills dated in 1977 (August to December) were shown by Exhibit "H". The Court held that the 1978–79 letters and the 11-11-1982 letter constituted sufficient acknowledgments within three years to save limitation as regards each bill. This disposed of the issues relating to admission/acknowledgment and limitation (issues 4 and 7).
- Interest (pre-suit and pendente lite): Interest prior to suit was governed by contract; the promissory notes showed the agreed rates. Exhibit "H" included an interest figure (Rs. 94,666.79) not seriously challenged. For pendente lite interest, the Court applied the principle that interest should ordinarily be at the agreed rate; in the absence of Reserve Bank circulars in evidence (relevant to calculating any agreed rates), the Court awarded the minimum rate prescribed in the promissory notes — 17% (for promissory notes of 1977 and 1981) — as the rate pendente lite on the specified principal portion (Rs. 69,106.80). Additionally, the Court awarded further interest at 6% on that principal sum to encourage expeditious execution.
- Usurious Loans Act: The defence's argument that rates might be usurious was considered but the Court held that application of the Usurious Loans Act was effectively impermissible after the amendment effected by s. 21A of the Banking Regulation Act, 1949 (as amended), from 15 February 1984. Because the suit was instituted only a few days before that date, the Court reasoned it would be improper to reopen the transaction under S.3 of the Usurious Loans Act unless, at the date of passing the decree, the Court were free to apply that Act to the transaction. Independently, the Court found no evidence of the "stark and glaring" unfairness required to invoke S.3: correspondence did not disclose unfairness and the defence had not adduced evidence sufficient to establish substantial unfairness.
- Liability of the fifth defendant: The plaint misdescribed the fifth defendant as "Kamal Kamania" while the actual person was "Kamal Kanoria". The Court held that because the real person had notice and was represented by counsel, the misdescription did not defeat the suit; issue 2 was answered against the fifth defendant. The Court noted the fifth defendant executed a 1981 promissory note (page 27 of Exhibit "A") and the plaintiff's witness deposed to that execution (EIC question no. 40). The Court rejected the defence reliance on Gouri Shankar: there was no significant or total alteration of the partnership such as to render execution against the firm's assets (or the new partner's interest) improper. The membership change (introduction of defendant No. 5 in place of a deceased partner) did not make the firm immune from satisfying the bank's decree.
- Negotiable Instruments Act: Although various sections of the Negotiable Instruments Act were referred to (Ss. 30, 32, 93, 94 and 98), the Court did not enter into these questions on the basis that the suit was not upon an instrument but upon original consideration.
- Relief: On the facts and documents before it, and for the reasons above, the Court concluded that the Bank's claim was established and a decree should be passed in the Bank's favour with specified interest and costs. The plaint was ordered to be corrected to substitute "Kamal Kanoria" for "Kamal Kamania" in relation to the fifth defendant.
Holding and Implications
Holding:
There shall be a decree for Rs. 1,63,773.59 in favour of the plaintiff (the Bank). Interest is awarded at 17% per annum pendente lite on Rs. 69,106.80 and further interest at 6% per annum on the said principal sum of Rs. 69,106.80. The plaintiff is entitled to costs assessed at Rs. 7,000/- (including Court Fees). The plaint is to be corrected to read "Kamal Kanoria" for the 5th defendant in place of "Kamal Kamania".
Implications
- Direct effect: The Bank obtains a money decree for Rs. 1,63,773.59 together with the specified interest awards and costs; the fifth defendant (Kamal Kanoria) is held liable as a partner and the misdescription in the plaint is formally corrected.
- Limitation and acknowledgments: The Court's findings confirm that the 1978–79 letters and the 1982 acknowledgment were sufficient to save the Bank's claim from being barred by limitation as to the bills dated in 1977.
- On legal principle: The Court applied established principles that entries in bankers' books, though admissible, generally require corroboration for decree-making; the Court found sufficient corroboration here. The judgment applies existing precedents but does not purport to lay down a new legal principle or overrule existing authorities.
- No broader precedent set: The decision resolves the dispute on its facts (documentary evidence, admissions, and the particular partnership circumstances). The opinion does not assert a novel legal rule beyond applying cited authorities to the facts before the Court.
Order accordingly.
1. This is a Bank's suit for recovery of loans granted to a partnership firm which is the first defendant in this suit. The four partners of the Firm are defendants Nos. 2, 3, 4 and 5 in the suit.
2. The first four defendants have filed a joint written statement and the fifth defendant has filed a separate written statement.
3. The parties went to trial on the following 8 issues:
1) Is the 5th defendant at all liable as a partner of the first defendant?
2) Is the suit liable to file against the 5th defendant for misdescription of Kamal Kano-ria as Kamal Kamania?
3) Are the defendants liable to pay a sum of Rs. 1,63,773.59 as alleged in paragraph 8 of the plaint?
4) Did the defendants admit or acknowledge their liabilities?
5) Did the plaintiff fail and neglect to realise the dues from the Firms on whom the bills were raised within the period of limitation as alleged in paragraph 6 of the Written Statement and if so have the defendants lost valuable right therefor?
6) a) Did the defendants agree to pay interest at the alleged rates as contained in Schedule ‘M’ to the plaint or at any lower rate?
b) Are the rates of interest contrary to the Usurious Loans Act as alleged in paragraph 7 of the Written Statement?
7) Is the suit barred by limitation?
8) To what reliefs, if any, is the plaintiff entitled?”
Proof of the amount due and owing:
4. This is the third issue in the suit. The Bank at this distance of time from the date of filing of the Suit faced certain difficulties about tracting witnesses who were at the concerned Brabourne Road Branch of the Bank at the time the transaction actually occurred. The Bank thus put in the box, one Debasis Adhikary who was not at the concerned branch at the material time. However, many of the documents executed by the defendants were admitted as part of Exhibit “A” being Judges Brief of Documents. Several signatures of the defendants were proved by Mr. Adhikary from the box and Mr. Surana appearing for the defendants, could, understandably, not put any serious suggestions to the witness disputing the signatures proved by Mr. Adhikary.
5. The most important document regarding exact proof of the amount claimed is Exhibit ‘H’ It is not disputed before me that Exhibit “H” is certified in accordance with the Bankers' Book Evidence Act. Mr. Adhikary gave evidence of his personal knowledge about the two signatures of the bank officials appearing on the face of Exhibit “H” for proving that exhibit. The amount claimed in the plaint appears as the total amount arrived at in Exhibit “H”.
6. Mr. Surana for the defendants stated that though Exhibit “H” might be an acceptable method of proving the actual entries in the Books of Accounts of the bank, yet by reason of S. 34 of the Evidence Act liability cannot be fixed upon the defendants by reason only of proof of entries in the Books of Accounts. Mr. Surana relied in this regard on the case of Chandradhar Goswami reported in AIR 1967 SC 1058. That case lays down the proposition that by reason of entries alone in the Books of Accounts, it would not be permissible for a Court of Law to pass a decree fixing liability on the defendants. Some other evidence is necessary for founding a decree on a confirmed legal footing. What that balance evidence will be is a matter for decision in the facts and circumstances of each different case. In the Supreme Court case there was a specific dispute about an advance of an amount of Rs. 10,000/-. Their Lordships of the Supreme Court felt that there was no evidence apart from the Books of Accounts to prove the advance of this sum of Rs. 10,000/-.
7. In our case, we do not find any specific dispute as to any principal amount raised on the part of the defendants, nor any specific dispute about any interest rate in that sense, that, the defendants have not said that the bank's interest rate charged is wrong and that the interest rate should be some other rate specified by the defendants. The entire defence on facts on the part of the defendants has been only of a defect finding nature.
8. Under those circumstances, the evidence as to the amount due given by the Bank would not need much confirmation for the purpose of passing of a decree. However, in this suit there are sufficient papers whereby even a judgment upon admission could have been passed. There is no dearth of documents for the purpose of additional evidence for corroborating the entries in the Books of Accounts.
9. To mention only one of the many acknowledgments or admissions which came from time to time from the defendants to the Bank, one need merely refer to the letter of 11th November, 1982 at page 41 of Exhibit “A” That letter mentions a principal amount of Rs. 13,063.73 as due and owing to the Bank. This sum, if anything, is about four thousand rupees more than the principal amount claimed by the bank in Exhibit “H” referred to above. I am of the opinion therefore that the dispute as to the amount claimed by the Bank is unsubstantial.
Limitation of the claim:
10. It is not in dispute that the bills which were discounted were of 1977 ranging from the months of August to December. That is also shown by Exhibit “H” and there was no challenge as if some other bills than the ones mentioned in Exhibit “H” were outstanding on the part of the defendants.
11. For the purpose of saving limitation as acknowledgment of a debtor-creditor relationship would be necessary within 3 years of these bills. There are many such admissions on record. Mr. Sen appearing on behalf of the plaintiff admitted documents Nos. 6, 7 and 8 disclosed on the part of the defendants. These were items 14, 15 and 16 of the brief of documents. In my opinion these letters of 1978 and 1979 contain a sufficient acknowledgment of the debtor-creditor relationship for saving limitation with regard to the each of the bills mentioned in Exhibit “H”. Read with the aforesaid letter dated 11-11-1982, this is sufficient to dispose of the 4th and 7th issues.
Interest:
12. Interest prior to date of suit is well known to be governed by contract. In the instant case the rate of interest is sufficiently indicated in the promissory notes which were executed by the parties from time to time. These are also part of Exhibit “A”. The interest calculated by the Bank as appearing in Exhibit “H” has not been shown to have been calculated at any rate other than those mentioned in the promissory notes or in annexure ‘M’ to the plaint. However, there is no challenge to the figure of Rs. 94,666.79 appearing as the claim for interest in Exhibit “H” which is worthy of any serious credence. Under these circumstances there is no reason not to accept the correctness of the total interest calculation made on the part of the Bank, as shown in Exhibit “H”, although it is not possible to hold that the Bank has succeeded in proving the individual rates of interest as set out in the schedule ‘M’ to the plaint.
13. So far as interest pendente lite is concerned, the grant of interest is also to be at the rate agreed unless there are compelling and inescapable reasons to the contrary. Mr. Sen appropriately relied in this regard on the two Division Bench decisions of this Court, the same being the cases of B. Gupta Tea Private Ltd. and Art. Trend Experts, reported respectively in AIR 1987 Cal at page 64 and AIR 1992 Cal at page 12. For the purpose of calculating the interest agreed upon between the parties, however, the relevant Reserve Bank circulars would be necessary. The same not being in evidence, there is no alternative to granting the bank any interest other than only a minimum rate prescribed in the aforesaid promissory notes. The minimum rate prescribed is 17% in the promissory notes of 1977 and 1981 and accordingly that shall be the rate of interest pendents lite. The Justice of the case would be sufficiently served if further interest is granted at not more than 6% hoping for expeditious execution on the part of the bank. I would perhaps have been minded to grant further interest at a slightly higher figure but I am persuaded not to do so if only out of veneration for the able and concise arguments advanced by Mr. Surana even though I am not able to accept them for the purpose of deciding any of the issues in his favour.
14. Though this point was seriously argued, I do not think it should have been raised at all. Under 21A of the Banking Regulation Act, 1949, as amended, the application of Usurious Loans Act is made in effect impermissible from the 15th February, 1984. It is only a few days before that date that this suit was instituted. In my opinion, it would be impermissible for a Court decreeing a suit to seek to reopen a transaction on the basis of S. 3 of the Usurious Loans Act unless ai the date of passing of the decree, the Court were free to apply the said Act to the transaction covered by the suit.
15. In any event, in the absence of any evidence being given from the box on the part of the defendants, it would take facts stark and glaring for a Court to come to a conclusion that the transactions covered by the suit were substantially unfair. I could not discern even any complaint of any unfairness in any correspondence. It was correctly submitted by Mr. Sen that such unfairness of transaction has to be proved as a separate element for invoking S. 3, than the other element of proving excessive interest. Mr. Sen relied upon two cases being the case of Nabin Chandra Deb, reported in AIR 1928 Rangoon at page 7 and the case of Narendra Nath, reported in AIR 1930 Calcutta at page 776. It is not necessary to enter into the facts of these two cases for drawing assistance as to under which extreme circumstances the Court will infer substantial unfairness of loan transactions.
The Fifth defendant:
16. The fifth defendant is described in the plaint as “Kamal Kamania”. Mr. Surana did not appear for any Kamal Kamania, but he appeared for Kamal Kanoria.
17. In the present day it is impossible to find any fault with a suit where a person named Kamal Kanoria has been misdescribed in the plaint as Kamal Kamania when the real person, that is, Kamal Kanoria, has notice, and is represented by able counsel for defending his case. The second issue accordingly must be answered against the fifth defendant.
18. It is also on record that the fifth defendant, after being introduced to the firm in the year 1981 in place of the deceased partner named Prabhudayal, executed the 1981 Promissory Note which is at page 27 of Exhibit-A. The fact of execution of the Promissory Note by the 5th defendant is also deposed about by the plaintiff's witness amongst other places at question No. 40 of his Examination-in-chief.
19. Regarding the liability of the fifth defendant, Mr. Surana relied upon a Division Bench Judgment of this Court in the case of Gouri Shankar reported in AIR 1959 Cal page 262. The said case is a good authority for the proposition that for the purpose of executing a decree against a partnership firm the assets of the firm may be proceeded against, but that, in case the firm remains the same only in name and there has been a substantial or total alteration in the nature of the Partnership holding, then and in that event, the levy of execution would be illegal, because it would amount to levying execution against the property of persons other than those against whom the decree has been passed. There is no such substantial or total alteration of partnership in the instant case. Apart from the fifth defendant coming in, the other partners have remained steady. If no decree is passed as against the fifth defendant it would mean that the interest of the fifth defendant in the partnership would be immune from execution pursuant to any decree passed herein. That cannot be, because there is no evidence before me showing that the defendant No. 5 in his introduction to the firm has, by reason of any contract or agreement, kept himself or his share in the firm immune from any of the continuing contingent or future liabilities of the firm. Mr. Sen also has drawn my attention in this regard to a clause in the agreement with the bank whereby the firm agreed even in the initial period (that is 1972) for being continuing to be bound notwithstanding any change in constitution, i.e the 6th Clause of the document at page-2 of the Exhibit A. Even though a firm is ordinarily a compendious way of description for the purpose of impleding partners in a suit yet it has been held in some cases that even a partnership is for some purposes a legal entity. It is not necessary to enter into any such fine discussion in this case as it is nobody's case that the partnership itself or the partnership properties are in any way, or to any degree, taken out of the possibility of satisfaction of the bank's decree by levy of execution as against those.
20. I need not enter into the questions raised by Counsel on the various sections of the Negotiable Instruments Act (Ss. 30, 32, 93, 94 and 98 were referred to) as the suit is not upon an instrument, or more than one instruments, but upon original consideration.
21. There shall accordingly be a decree for Rs. 1,63,773.59; Interest @ 17% p.a pendente lite on Rs. 69,106.80, further interest @ 6% p.a on the said principal sum of Rs. 69,106.80. The plaintiff shall be entitled to the costs of this suit assessed at Rs. 7,000/- including Court Fees paid.
22. The plaint shall be treated as corrected to read Kamal Kanoria for the 5th defendant in place of Kamal Kamania.
Order accordingly.
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