M.Venugopal,J.
The petitioner/Bank has filed this writ petition praying for issuance of a writ of certiorari by calling for the records of the impugned order in R.A.No.48 of 2005 dated 03.01.2006 passed by the second respondent/Debts Recovery Appellate Tribunal and to quash the same as arbitrary, unfounded in law, illegal etc.
2. The second respondent/Debts Recovery Appellate Tribunal while allowing the R.A.No.48 of 2005 in its order dated 03.01.2006 has inter alia opined that 'it is satisfied that the first respondent/appellant was a victim of circumstances, and his need for the amount to discharge the loan incurred in his daughter's marriage was exploited by the first defendant and the first respondent/appellant was made as a scape goat and the title deeds were handed over to Mr. N. Anand Sai with which certain documents were created, about which the appellant was not aware and in fact, the defendant nos.3 to 5 have given complaints to the police about the fraud committed by the first defendant with the connivance of the manager of the bank and that the first respondent/appellant also gave such complaint to the police and the appellant was also called upon for enquiry and that the manager of the respondent bank was also suspended, would go to show that there is some truth in the arguments advanced on behalf of the appellant, that his signatures were obtained in blank papers without even explaining contents of the documents and those peculiar circumstances make one has to believe the case of the first respondent/appellant is true and in the said view of the matter, it is inclined to accept the case of the appellant/first respondent that he was a victim of the circumstances and that he did not offer himself or his property as a surety for the loan requirements of the first defendant but however, the first respondent/appellant was liable to pay the admitted amount of Rs.2 lakh together with interest thereon etc., and resultantly has come to the conclusion that the first respondent/appellant had borrowed Rs.2 lakhs until which he is liable to pay simple interest together at 12% per annum from the date of borrowing and Recovery Certificate could be issued on the said amount and directed the writ petitioner/Bank to file a revised statement of accounts before the Debts Recovery Tribunal calculating interest at the contractual rate on Rs.2 lakhs from the date of borrowing, up to the date of filing of the original application and at the rate of 12% simple interest from the date of filing of the original application till 03.01.2006, i.e., the date of order of the Appellate Tribunal after giving credit to the amounts paid by the appellant i.e. Rs.4.78 lakhs and serve a copy of the same to the appellant, within 3 weeks from the date of receipt of the said order and the Debts Recovery Tribunal shall issue a fresh Recovery Certificate for the said amount and that the first respondent/appellant shall pay the amount, as shown in the revised statement of accounts, within 4 weeks from the date of receipt of the revised statement, failing which the amount shown as due in Recovery Certificate will carry simple interest at the rate of 12% p.a. from 03.01.2006 till the date of realisation and thus modified the order of decree passed by the Debts Recovery Tribunal-I, Chennai.
3. The learned counsel for the writ petitioner/Bank submits that the impugned order in R.A.No.48 of 2005 dated 03.01.2006 of the second respondent/Debts Recovery Appellate Authority is illegal and an arbitrary one since the same has been passed brushing aside the tangible evidence available on record in the case and without considering the pleadings and documents and the circumstances placed before the Debts Recovery Tribunal-I, Chennai and that the impugned order, passed by the second respondent/Debts Recovery Appellate Authority, suffers from serious legal infirmities inasmuch as the same having been passed contrary to the provisions of law and as a matter of fact, the second respondent/Debts Recovery Appellate Authority has considered extraneous circumstances to arrive at a conclusion and allowed the appeal of the first respondent/appellant erroneously and moreover, the first respondent/appellant in substance agreed that he has offered his property as mortgage for the facility availed by the borrower and has executed the documents and the contention of the first respondent/appellant that he has not been aware of the purpose for which the documents have been executed is unsustainable in the eye of law and such a plea cannot be countenanced in law against the documentary evidence and indeed the finding rendered by the second respondent/appellate authority that the third party guarantors are victims of an alleged fraud committed by the borrower for availing the loan facility is neither based on any valid evidence nor any legal proceeding has initiated by the third party guarantors against the borrowers for the alleged fraud, if any, and significantly, the execution of the loan documents viz., Deed of Guarantee in favour of the petitioner/Bank is not in dispute and it is neither the contention nor the finding of the Debts Recovery Tribunal-I, Chennai that the writ petitioner/Bank was also party to the alleged fraud and in short the second respondent/appellate authority should not have allowed the appeal based on surmises and untenable contentions raised at the appellate stage and also that the first respondent/appellant has given complaint to the police after the final order has been passed by the Debts Recovery Tribunal-I, Chennai, and if at all the first respondent/appellant has been defrauded, it is for him to proceed against the borrower and the conclusion of the second respondent/appellate authority that the first respondent/appellant is liable to pay only a sum of Rs.2 lakhs with interest etc., is very much against the documentary evidence which stands proved on the admission of the first respondent/appellant and the same is against the contractual obligation of the first respondent/appellant to the writ petitioner/Bank and that apart, the second respondent/appellate authority based on the documents produced by the writ petitioner/Bank and on the basis of the agreements produced by the first respondent/appellant said to have been entered into between him and the borrowers should have held that the first respondent/appellant stood as guarantor for the loan facility availed by the first defendant and mortgaged his property and deposited his title deeds and in short these aspects of the matter have not been either adverted to, or appreciated by the second respondent/appellate authority in a proper perspective which has resulted in miscarriage of justice and therefore, prays for allowing the writ petition in furtherance of substantial cause of justice.
4. Per Contra, the learned counsel for the first respondent submits that the petitioner/Bank has sanctioned a term loan of Rs.7.40 lakhs and a packing credit of Rs.4 lakhs to one Mr. Anand Sai, Proprietor of M/s. Maruthi Electronics, having units one at B20, Mugappair Industrial Estate, Chennai-50 and another at 263/2, Vanagram, Ambattur Industrial Estate, Chennai-58 on 28.09.1992 and for this loan one Mr.S. Murugesh, V.Loganathan and Smt. P. Rajalakshmi stood as guarantors and on 11.10.1993, the petitioner/Bank has sanctioned the term loan of Rs.17.60 lakhs to Mr. Anand Sai and two term loans have been availed by Mr. Anand Sai with the petitioner/Bank and when the first respondent approached Mr. Anand Sai of M/s. Maruthi Electronics through one Mr. Murali, a neighbour, for financial help the said Mr. Anand Sai has agreed to arrange loan from the petitioner/Bank provided the first respondent gives his property as collateral security and the first respondent has agreed to give his house property as collateral security for the loan to be availed and therefore, they have entered into an agreement to that effect on 02.09.1993 and the first respondent has handed over the original title deeds of his house property and other papers to Mr.Anand Sai on that day itself and that Mr. Anand Sai has interm handed over the same to the petitioner/Bank and on 11.10.1993 the first respondent along with Mr. Anand Sai went to the petitioner/Bank and the bank manager obtained the first respondent's signature in some documents which were blank at that time and after obtaining the signature, the first respondent/manager of the bank has given Rs.1.90 lakhs and informed that a sum of Rs.10,000/- has been taken as commission for sanctioning the loan and in all a sum of Rs.2 lakhs has been given as loan to the first respondent and that the manager has informed that the loan has to be repaid within a period of 3 years and to the shock and surprise of the first respondent, he came to know that he stood as a guarantor for the loan availed by Mr. Anand Sai to the petitioner/Bank and that he never knew that he stood as a guarantor for Mr. Anand Sai and that taking advantage of the position of the first respondent, Mr. Anand Sai with the connivance of the petitioner/Bank manager has committed a fraud and that the first respondent has been made as scape goat and that the first respondent has not received any notice from the petitioner/Bank before filing of the case to recover the amount against Mr. Anand Sai and other guarantors and that the petitioner/Bank has filed O.A.No.41 of 1997 before the Debts Recovery Tribunal-I, Chennai to recover the amount due to them against Mr. Anand Sai and others and all the guarantors have taken a plea that they are innocent, victim of circumstances and that they were unaware that they stood as guarantors for the loan availed by Mr. Anand Sai with the petitioner/Bank.
5. Further, it is the contention of the first respondent/7th defendant that as a matter of fact O.A.No.41 of 1997 has been allowed by the Debts Recovery Tribunal-I, Chennai holding that the petitioner/Bank is entitled to the Recovery Certificate against Defendant Nos. 2,6 and 7 and discharge the defendants 3 to 5 from the liabilities as they have paid the claim amount and however, the first respondent has lodged a criminal complaint with CBI Chennai, against the petitioner's bank manager and Mr. Anand Sai and that he has been enquired by the CBI on 06.06.2005 and the first respondent has preferred R.A.No.48 of 2005 before Debts Recovery Tribunal, Chennai and the said appeal has been allowed with an observation that the first respondent was never informed, either by the principal Debtors or by the bank manager that a signature has been taken as guarantor for the loan availed by the first defendant and the signature of the first respondent has been obtained by playing fraud and misrepresentation and dissatisfied with the orders of the second respondent/appellate tribunal, the petitioner/Bank has filed the present writ petition and added further, the petitioner/Bank has not challenged the observation of the Debts Recovery Tribunal made in para 15 of the order passed in O.A.No.41 of 1997 dated 31.12.2004 and even in the present writ petition the said observation of the Debts Recovery Tribunal has not been challenged.
6. Continuing further, the learned counsel for the first respondent contends that the petitioner/Bank has not discharged the burden of proof and the petitioner/Bank has not pointed out as to how the order of the second respondent/appellate tribunal suffers from various legal infirmities and also it is relevant to point out that the alleged deposit of title deeds was not made when the first respondent was present in the bank along with Mr. Anand Sai and as such, the first respondent is not aware of the deposit of title deeds with the bank and in short, the learned counsel for the first respondent supports the order of the second respondent/appellate tribunal in all aspects and prays for dismissal of the writ petition.
7. It is relevant for this Court to point out that the writ petitioner/Bank has filed O.A.No.41 of 1997 as an applicant before the Debts Recovery Tribunal-1, Chennai as against 1 to 8 Defendants mentioned therein and the first respondent herein by name Mr. B. Pappa Mudaliar was arrayed as seventh defendant and the said Anand Sai was arrayed as the first defendant in the said O.A.No.41 of 1997. The Tribunal, has passed a final order on 31.12.2004, the operative part is extracted hereunder;
"(a) The applicant bank is entitled for a Recovery Certificate against defendants 1,2,6 & 7 for recovery of a sum of Rs.55,55,830.66p in respect of Term Loan II, Packing Credit and OD facilities from the date of OA till the date of application with future interest @ 17% p.a. (seventeen percent simple interest) from the date of application till the date of realization with legal costs of the OA.
(b) Defendants 3 to 5 are discharged from their loan liability as they have paid the OA claim amount of Rs.9,10,771/- during the course of the proceedings. Hence, the Registry of this Tribunal is directed to release the original title deeds pertaining to D3 to D5 directly, within four weeks from the date of this final order, through their counsel, after obtaining necessary acknowledgment and undertaking from them under intimation to the applicant bank.
(c) It is further declared that in case of default of payment by the defendants 1,2,6 and 7 the applicant bank is at liberty to sell the other OA schedule properties and to adjust the sale proceeds towards the amount due.
(d) If the sale proceeds are not found sufficient after defraying the expenses of such sale for the payment of all such amounts, the defendants 1,2,6 and 7 are jointly and severally liable to pay the amount of such deficiency with interest mentioned above until realisation and also from their assets in addition to the OA scheduled properties.
(e) As regards the D8 is concerned, the D8 is only a proforma defendant and no claim is made against it" with such findings the Tribunal has directed the issue of Recovery Certificate accordingly.
8. It is also proper at this juncture to mention that the Debts Recovery Tribunal-I, Chennai in its final order in O.A.No.41 of 1997 dated 31.12.2004 in para 12 has observed as follows;
"It is also a matter of record that in this matter the D1,D2,D7 and D8, although filed their written statements, but failed to file any Counter Proof Affidavit against the proof affidavit of the bank and in fact they are not contesting the case since then. The D1, D2, D6, D7 and D8 also did not cross examine the bank witness nor filed any rebuttal documents to oppose the OA claim of the bank against them or to substantiate the defense taken by them in their written statement. In this matter, the D8, the State Bank of India, is only a proforma party. Hence, no contra evidence is available in the record against the loan liability of the D1,D2,D6 and D7 are concerned in the present OA claim."
9. Continuing further, the Debts Recovery Tribunal-I, Chennai has observed the following at paras 15 and 16 of its final order in O.A.No.41 of 1997 which runs thus;
"15. By perusal of this averments and the admission of the defendants 3 to 5, I feel that these defendants have not disputed the originality of their signatures over the deed of guarantee and they have further impliedly admitted that they had voluntarily handed over their title deeds to the D1 for seeking private finance from him only and these title deeds were allegedly misused by the D1 for availing a personal loan facility from the applicant bank by producing them as guarantors without their express willingness and necessary consent. Further the D3 to D5 did not give sufficient evidence that what compelled them to go with the D1 to the bank office and to sign some papers without knowing the contents thereof and without knowing the implications of the same. If they were really innocent people, they should not have surrendered their title deeds with the bank officials or to Mr. Anand Sai, until and unless they were fully explained about the terms and conditions stipulated in the documents signed by them and without agreeing for the same. They did not make any complaint before the higher authorities of the bank that they were cheated or exploited by the D1 by producing them as a guarantor. They also failed to write any protest letter to the higher authorities of the bank or any higher public authorities and they are raising this issue only for the first time before this Court.
16. By perusal of their Counter Proof Affidavits and the documents annexed therewith, it is evident that they admittedly have taken some loan from Mr. Anand Sai, and that is why they voluntarily handed over their title deeds to him. In these circumstances, this Court cannot hold that the dendants 3 to 5 are fully strangers to the present loan transaction and only it can be inferred that perhaps they were cheated only. Perhaps the D1 misused his position and exploited them and they can be presumed as a victim for the alleged fraud committed by the D1 for availing the loan facilities for himself and for using them as guarantor. But the bank cannot be found fault with such act as the bank is also equally sufferer as the loan amount remains unpaid. Moreover, they have already deposited the OA claim amount in respect of the Term Loan-I. Hence, it can be held that the bank has produced sufficient proof that the defendants 3 to 5 visited the office of the bank, signed the deed of guarantee for the Term Loan-I voluntarily and also deposited their title deeds with the bank through the D1 for the purpose of creating equitable mortgage. Hence, the OA claim for the Term Loan-I can very well be decided against the defendants 3 to 5. However, it is also a matter of record that the bank has already received the full OA claim amount of Rs.9,10,771/- under the Term Loan-I as on the date of filing of the OA during the course of the proceedings in this Court and this amount is being kept by the bank under the no-lien interest bearing account and the bank has not materialize the compromise. The bank, at the most is entitled for only pendente-lite and future interest on this Term Loan-I from the guarantors/defendants 3 to 5 which is the domain and discretion of this Court."
11. That apart, the Debts Recovery Tribunal-I, Chennai has also come to the conclusion that the defendants 3 to 5 have taken serious pains for settling this matter and also deposited an amount towards their loan liabilities in installments with a hope that a one time settlement with the bank and therefore, they deserve some sympathy for awarding pendente-lite and future interest. It has also been further held that the pendente-lite and future interest is to be restricted to the extent of the interest accrued on the amount deposited by D3 to D5 which is already kept in the interest bearing no-lien account of the applicant bank and the bank may appropriate this amount towards the loan liability of the Term Loan-I and in the result, the OA claim in respect of Term Loan-I stands fully satisfied and ultimately the guarantors/defendants 3 to 5 stands fully discharged under the Term Loan-I and the bank was directed to return their original title deeds to them immediately etc. Moreover, the Debts Recovery Tribunal has also held that the writ petitioner/Bank is entitled for 17% simple interest on Rs.55,55,830.66p in respect of Term Loan-II, Packing Credit and OD facilities against the defendants 1,2,6 and 7 from the date of filing of OA till the date of realisation with costs of the present proceedings.
12. A perusal of the O.A.No.41 of 1997 (as seen from the typed set of papers filed before this Court) presented before the Debts Recovery Tribunal-I, Chennai shows that the writ petitioner/Bank is the applicant and there are totally 8 persons who are arrayed as defendants including the first respondent as the 7th defendant.
13. At this juncture, this Court pertinently points out that the 7th defendant in O.A.No.41 of 1997 before the Debts Recovery Tribunal-I, Chennai has figured as an appellant in R.A.No.48 of 2005 before the second respondent/Debts Recovery Appellate Tribunal, Chennai and the writ petitioner/Bank has been shown as the only respondent to those proceedings and conspicuously , D1 to D6 and D8 namely State Bank Of India, Siru Thozhil Branch, Nungambakkam, Chennai-34 have not been shown as parties to the proceedings in R.A.No.48 of 2005 before the second respondent/tribunal.
14. In this connection, we deem it appropriate to make a relevant mention that persons who are necessary parties to the original application in O.A.No.41 of 1997 are also the necessary parties to R.A.No.48 of 2005. If necessary parties are not shown as parties in R.A.No.48 of 2005, then the R.A.No.48 of 2005, as framed by the first respondent/appellant, showing only the writ petitioner bank as respondent, is not a properly framed one. Furthermore, if necessary parties are not joined in a particular proceeding before a competent authority, then, the order passed will be a nullity and has no binding effect. To bring a person as a party defendant is not a substantive right, but one of procedure and a Court/Tribunal has discretion in its proper exercise. In a writ of certiorari not only the Tribunal or Authority whose order is sought to be quashed but also the other parties in whose favour the said order is issued are necessary parties.
15. Indeed, the non-joinder of defendant nos.1 to 6 and 8 in O.A.No.41 of 1997 as necessary parties to the proceedings in R.A.No.48 of 2005 before the second respondent/Debts Recovery Appellate Tribunal is an infirmity. After all, parties are added in a pending proceeding before an appropriate forum to avoid plurality of proceedings. Also, it is to be borne in mind that the basic principle is that an individual is made a party in an original proceedings because there is a cause of action against him, and when causes of action are joined, the parties are also to be joined. If an enforceable right of persons are to be affected or likely to be affected, then, they must be influenced as necessary or proper parties as the tribunal deems fit and proper based on the facts and circumstances of a given case.
16. In the case on hand, it is useful to refer to the prayer made by the writ petitioner/Bank in O.A.No.41 of 1997 on the file of the Debts Recovery Tribunal-I, Chennai therein the bank has sought for a judgment and certificate (in the nature of decree) to be issued to the Recovery Officer against the respondent nos.1 to 7 therein jointly and severally, directing the Recovery Officer to recover from them the following;
"(a) The sum of Rs.34,88,754/- (due under Term Loan-I and Term Loan_II) with the liability of Respondents 2 to 5 being limited to the sum of Rs.9,10,771/- (due under the Term Loan-I) with future interest thereon at the rate of 20.75% 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 Credit II) with the liability being limited to Respondents 1, 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;
(c) for costs of the proceedings (in proportion to the liabilities of the Respondents) and granting such further or other reliefs;
(d) By sale of the properties described in the Schedule A,C,E,G,I,K and L hereunder by auction sale and application (after defraying the sale expenses therefrom), of the Sale proceedings towards the Principal, interest and costs in that order towards payment of the amounts claimed in (A) and (D) supra;
(e) by attachment and sale of other properties, both movables and immovable of the Respondents and application of the sale proceeds towards the aforesaid amounts due;
(f) recover from the 9th Respondent the amount realised by it if any, by sale of the machinery seized by the Advocate-Commissioner appointed in application No.3379 of 1995 in C.S.No.1059 of 1995 on the file of High Court of Madras, as well as Application No.3581 of 1995 in C.S.No.1060 of 1995 transferred to and pending on the file of the 5th Additional City Civil Court as O.A.No.394 of 1996."
17. The writ petitioner/Bank in its O.A.No.41 of 1997 has averred that the first respondent therein approached the bank for credit facility in regard to his improvement in his business and that the bank sanctioned the Term Loan of Rs.7.40 lakhs in September 1992, carrying interest at the rate of 9.75% p.a., over Bank rate the minimum being 19.75% p.a., inclusive of 0.75% pa., interest tax and with 2% penal rate all with quarterly rests and packing credit of Rs.4 lakhs also has been sanctioned and it has been repaid and to avail a facility of Term Loan, the respondents in O.A.No.41 of 1997 have 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 first respondent and that the respondent nos.2 to 7 have executed general forms of guarantee.
18. The respondents 2 to 7 executed General Forms of guarantee and are the guarantors and also on 11.10.1993, second Term Loan of Rs.17.60 lakhs and Additional Packing Credit of Rs.30 lakhs were sanctioned 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% penal rate and with 0.75% interest with quarterly rests and the latter carries interest at the rate of 1% p.a., over bank rate the minimum being 13% p.a., inclusive of 2% penal rate with quarterly rests and the 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 first respondent, and
(e) An instrument of Hypothecation of machinery by the first respondent.
B. In respect of II Packing Credit
(a) A promissory note for Rs.30 lakhs by the first respondent.
(b) A letter of undertaking for paying penal interest by the first respondent.
(c) A letter of Undertaking for packing credit advance by first respondent.
(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 of guarantees and are guarantors in respect of these loans and the interest charged on packing credit advances was debited in current account, thereby creating an over draft and the first respondent hypothecated all the machinery goods including raw materials described in the schedule hereunder and the plaintiff has the first charge over the same and the 8th respondent has been impleaded as a party to this suit as the 1st respondent has again hypothecated schedule C properties to the 8th respondent and has at the most only a second charge on the same and moreover, with an intent to further secure the due repayment of the amounts due under the facilities to be granted to the first respondent, the defendants 3, 4 and 5 deposited on 26.09.1992 with the applicant at Madras at its Purasawalkam Branch Office, the title deeds listed in schedules B,D and F described in Schedules A, C and E of the application and also later with an intent to secure the due repayment of the entire amount due under all the loans payable to applicant by the respondents 1,6 and 7 deposited with the applicant/bank on 03.09.1993 at Purasawalkam branch at Madras their title deeds listed in Schedules H and I respectively of the properties mentioned and as on date of filing the suit on 23.08.1995 the amounts mentioned hereunder are liable to be paid in respect of the loan accounts of the writ petitioner/Bank by the first respondent as principal debtors and respondents 2 to 7 as guarantors and the interest of packing credit has been debited in current account and has been treated as over draft and amount due is as follows;
20. Before the Debts Recovery Tribunal the first respondent therein has filed a counter wherein among other things he has stated that in September 1992, a term loan has been sanctioned for Rs.7.40lakhs and a packing credit loan of Rs.4 lakhs with 25% as promoters direct margin money and the P.C. Loan has been given on a irrevocable letters of credit etc., and later, the writ petitioner/Bank has again sanctioned a second term loan of Rs.17.60 lakhs and the second P.C. Loan for Rs.38 lakhs an irrevocable letter of credits on 11.12.1993 and Rs.6 lakhs worth of exports were adjusted in the 2nd P.C. Loan etc., and finally the writ petitioner bank has closed the unit II at Vanagaram stopping manufacturing and rendering jobless for 45 persons and all the machinery's and materials were seized and were put under the custody of the petitioner/Bank, resulting in a heavy loss to the promoter financially and if Unit is handed over to him, he will clear all the dues to the petitioner/Bank etc., and the loan repayment can be rescheduled with a 6 months holiday period and the commencement of exports and repayment will be regularised within a period of 6 months and even he has approached BIFR for restarting the unit.
21. The respondents 2 to 4, 6 and also 7 namely (first respondent in writ proceedings) have adopted the reply statement filed by the first respondent for them also, as per the memo dated 14.05.1997 filed by their counsel before the Debts Recovery Tribunal.
22. It is quite apt to recall the observations made by the Debts Recovery Tribunal-I Chennai, at para 13 of its order dated 31.12.2004 in O.A.No.41 of 1997 which runs hereunder;
"The applicant bank witness, Mr. Sundareswaran, in his elaborate proof affidavit dated 09.10.1997, has categorically stated that the D1, Mr. Anand Sai, being a sole proprietor of M/s. Maruthi Electronics, had borrowed some money from the bank as mentioned in the OA, for which the defendants 2 to 7, have stood as guarantors. However, this witness has fairly conceded with this fact that the liability of the defendants 2 to 5 is limited only to the extent of Rs.9,10,771/- due under the Term Loan I as on the date of the filing of the OA. While for other credit facilities, i.e., Term Loan II. Packing Credit and Over Draft facilities, the defendants 1,2,6 and 7 are liable, as being the principal borrower and guarantor. No Counter Proof Affidavit is filed by D1, D2, D6 to D7 to deny their loan liability in respect of Term Loan II, Packing Credit and Over Draft facilities, nor the D1, D2, D6 to D7 have filed any rebuttal documents and to confront the documents produced and relied on by the bank to prove its debt and the OA claim against them (i.e. D1, D2, D6 and D7). Hence, I find that the applicant bank has well established the OA claim against the D1, D2, D6 and D7 in respect of Term Loan II, Packing Credit and Over Draft facilities and the bank is entitled for a Recovery Certificate inclusive of contractual rate of interest till the date of filing of the OA and pendentelite and future interest as per this Order."
23. The First Respondent/Appellant/ 7th Defendant being aggrieved against the orders dated 31.12.2004 in O.A.No.41 of 1997 passed by the Debts Recovery Tribunal -I, Chennai has preferred R.A.No.48 of 2005 before the second respondent/Debts Recovery Appellate Tribunal, Chennai.
24. The first respondent/appellant/ 7th defendant in his R.A.No.48 of 2005 has, inter alia, averred that he has performed the marriage of his daughter, Shanti before 1993 and in connection with the marriage of his daughter he has borrowed money from third parties for interest and in that year he has also planned to organise the marriage of his second daughter, and therefore, he has been in need of more money and at that point of time, he was serving as a welder in Avadi Tank Factory and has been earning around Rs.400/- per month as basic salary and his wife was maintaining a small diary and he was owning a house property in door No.1, Cholan Street, Charles Nagar, Pattabiram which has been valued at Rs.4 lakhs at that time and hence, he has intended to borrow more money at lesser interest by mortgaging his house and thus he has approached one Mr. Murali, who has been residing in Charles Nagar and arranging loan to various persons from various sources and the appellant also approached him and requested him to arrange a loan of Rs.2 lakhs and that he has informed that there is an office in Chennai which has been arranging loans at bank interest and the said office is having a tie up with the bank and that he demanded 20% of the loan amount as commission and further informed that the interest will be at 7% per annum, but he has to pay 5% more as commission to the company and since he has agreed to the terms, the said Mr. Murali has taken him to Teynampet to a private office where he met the auditor, Mr. Srinivasan and in that place he also met Mr. Anand Sai, having a company in Ambattur and both Mr. Srinivasan and Mr. Anand Sai obtained his signatures in many papers and forms and an agreement dated 02.09.1993 has also been executed between him and Mr. Anand Sai (the first respondent in O.A.No.41 of 1997) and in the said agreement, it has been mentioned that he has received a loan of Rs.1.9 lakhs from Mr. Anand Sai and has to be repaid in three years and further, prior to the signing of the agreement, Mr. Murali has informed that some officials from the bank will visit his house and they may require his signatures and some persons from Ambattur visited his house in an Ambassador car as informed by Mr. Murali and obtained his signature in some papers. After about a month from the date of the receipt of money by him, the said Mr. Murali has informed that he has to sign in some more papers in bank etc.
25. Continuing further, he has submitted that as informed by Mr. Murali he has gone to the Bank of Baroda in Ambattur and met the manager and informed that Mr. Murali asked him to meet the manager to put his signatures in some papers and that the manager of the Bank has not informed him about the purpose of his signatures and the nature of transaction and the money involved and that he has been under the impression that for the land of Rs.1.9 lakhs he got from M. Anand Sai, there has been a tie up between Mr. Anand Sai and Bank and for that loan and purpose, he has put his signature. Further, before he has visited the Bank and also Teynampet, he did not know Mr. Anand Sai and he has no necessity to help Mr. Anand Sai in any way and while obtaining his signature, the manager has been enquiring about his personal details and he has been furnishing his details and at that point of time, the manager has taken his signatures in many places and he has not known the details and contents of the papers in which the signatures have been obtained. Subsequently, the said Mr. Anand Sai sent a letter to him requiring him to pay an interest of Rs.34,200/- and he, by that time, has arranged money and informed him that he will pay the entire balance immediately, and release his document, but the said Mr. Anand Sai (the first respondent in O.A.No.41 of 1997) has not responded properly and hence he later on has used the money for some other purpose, and therefore, he has received a notice from the Debts Recovery Tribunal-I Chennai, and only upon receipt of such notice, he came to know that he has been cheated and that he has filed his application before the Debts Recovery Tribunal-I, Chennai and he has been hoping that he will be given an opportunity by the Debts Recovery Tribunal-I, Chennai, by explaining his case by examination of witness, but without examining him and also without providing him a reasonable opportunity to contest his case, the Debts Recovery Tribunal has decreed the O.A.No.41 of 1997 directing him to pay the entire claim amount.
26. The substratum of the case of the first respondent/appellant/7th defendant is that he has not borrowed any money from the writ petitioner/Bank and he has obtained money only from Mr. Anand Sai (first respondent in O.A.No.41 of 1997) and all along, he has been made to blelieve that he has been signing only for the purpose of getting the loan from a private party and he has been misled by the statement of Mr. Murali and others that there has been a tie up with the said Mr. Anand Sai and some Bank and only with those statements the signatures has been obtained in some papers.
27. It is also the stand of the first respondent/appellant/ 7th defendant that he has studied only up to VI Standard and does not know English and the contents of the documents in which his signatures have been obtained and the contents of which have not at all been explained to him and therefore, the documents cannot be put 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 fastened upon him and under these circumstances, the decree dated 31.12.2004 passed by the Debts Recovery Tribunal-I, Chennai in O.A.No.41 of 1997 is not correct.
28. One cannot brush aside an important fact that the 8th defendant in O.A.No.41 of 1997 viz., State Bank of India, Siru Thozhil Branch, Nungambakkam, Chennai-34, in its counter in O.A.No.41of 1997 before the Debts Recovery Tribunal-I, Chennai has categorically stated that it has granted to the first respondent, Mr. Anand Sai, Proprietor of M/s. Maruthi Expanders, credit facilities by way of Term Loan of Rs.4,98,000/- for purchasing machinery and Cash Credit (Export Packing Credit) Limit of Rs.5,50,000/-, and the said credit facilities have been secured by means of pledge of scheduled machines and personal guarantee of Mrs. G. Saroja and Mrs. T.C. Yamuna Bai and mortgage of two immovable properties belonging to Mrs. G. Saroja and Mrs.T.C. Yamuna Bai and that further, it had filed suit in O.S.No.400 of 1996 on the file of Sub-Court, Poonamallee, which got later transferred to the Debts Recovery Tribunal as T.A.No.1578 of 1997 for recovery of a sum of Rs.13,29,437.32 with future interest at 17% per annum with quarterly rests from the date of plaint till the date of realisation with costs and for sale of the plaint 'A' and 'B' schedule immovable properties and also has prayed for the sale of schedule 'C','D' and 'E' movable machinery and goods in the business of the first defendant subject to the claim of the writ petitioner/Bank as first charge holder and the tribunal has passed orders on 02.09.1999 in T.A.No.1578 of 1997 and therefore, has prayed for issuance of an order recognising its rights as 'Second Charge Holder' subject to the rights of the writ petitioner/Bank as First Charge Holder relating to its schedule K & L machinery in the aforesaid original application.
29. It is not out of place to point out that as against the 8th defendant namely, State Bank of India, Siru Thozhil Branch, Nungambakkam, Chennai-34, no relief has been claimed by the writ petitioner/Bank in O.A.No.41 of 1997 on the file of Debts Recovery Tribunal-I, Chennai.
30. Before the second respondent/Debts Recovery Appellate Tribunal, Chennai, the first respondent/appellant/ 7th defendant in URA.No. 15 of 2005 has filed an additional affidavit dated 15.06.2005 mentioning that the writ petitioner/Banks Branch Manager, in collusion with the main accused Mr. Anand Sai, has fabricated records as if many third parties and himself stood sureties for the loan raised by the said Mr.Anand Sai and thereby misappropriated the funds of the nationalised bank and since, the conduct of the bank officials attract the offence punishable not only under
Section 420 IPC but also under the Prevention of Corruption Act, he has lodged a complaint, in writing, dated 17.03.2005, with the Central Bureau of Investigation, Chennai and the Central Bureau of Investigation (Anti Corruption Branch) in Chennai, has commenced its enquiry and issued him a summon dated 24.05.2005 for his appearance before the Additional Superintendent of Police, Mr.V.A. Mohan at the earliest, and he has appeared before the CBI on 06.01.2005 and gave his statement and that he understands that CBI has taken steps to examine other witnesses also in this regard.
31. The stand taken by the writ petitioner/Bank is that the first respondent/appellant/ 7th defendant is liable to pay the loan amount sanctioned and paid to the (first defendant in O.A.No.41 of 1997 on the file of Debts Recovery Tribunal-I, Chennai) because of the fact that the first respondent/appellant/ 7th defendant has executed the guarantee agreement and other documents knowing fully that he stands as a surety of the first defendant in O.A.No.41 of 1997 and as such the first respondent/appellant/ 7th defendant is estopped from contending that the documents have been obtained from him by means of practicing fraud, misrepresentation etc.
32. In the agreement entered into between the first defendant in (O.A.No.41 of 1997 namely Mr.N. Anand Sai) and the first respondent/appellant/ 7th defendant on 02.09.1993 it is mentioned that the first defendant, Mr. Anand Sai is the sole proprietor of Maruthi Electronics, having its registered office at B20 Mogapair west Industrial Estate Ambattur, Madras-50 that he has approached the writ petitioner/Bank, Ambattur for enhancement of credit facility for Maruthi Electronics, Bank of Baroda scrutinised the proposal and agreed to grant financial assistance, provided, he should bring in collateral security of third party for the same and that he has approached the first respondent/appellant/ 7th defendant and that the first respondent/appellant/ 7th defendant has agreed to give his property subject to the following terms and conditions for which both agreed mutually is as follows;
"(1) The party of the first part should give a Loan of Rs.1,90,000/- to the party of the second part at the rate of 12% per annum and the same amount will be repaid by the party of the second part at the end of third year that is at the time o party of the first party returning the documents to party of the second part.
(2) The party of the first part has paid on this date a sum of Rupees One Lakh and Five Thousand only by cash and balance amount of Rupees Eighty Five Thousand will be paid at the time of party of the second part creating equitable mortgage with Bank of Baroda, Ambattur branch, the party of the second part has also lodged his original title deeds to Bank of Baroda.
(3) The party of the second part is no way responsible for the payment of Interest or principal to Bank of Baroda for the Loan to be availed by Maruthi Electronics otherwise the party of the second part is responsible only for the payment of Rs. One Lakh Two Ninety Thousand Only along with the interest at the rate of 12%.
(4) The party of the first part is solely responsible for returning the document after redeeming the document from Bank of Baroda.
(5) The whole transaction is mutually agreed by the parties only for the creation of equitable mortgage and it is also understood that the party of the first part will clear the title deeds within three years.
(6) In case of the party of the first part not giving the document on time that is after three years to the party of the second part the party of the second party has got all the right to claim from the party of the first part all the damages, expenditure and market value of the property for which the party of the first part has agreed specifically. It is also understood that the time is the essence of this contract.
(7) The party of the second party is also responsible for the payment of interest @ 12% per annum quarterly on time every quarter without any delay, non payment of Interest on time the party of the first part is entitled to collect overdue interest @ 5% over and above the normal interest and also the party of the first part has all the right to collect the interest and overdue interest through the Court of Law.
(8) It is also the duty of the party of the second part to furnish any papers connected with the title deeds if asked by the bank that is Bank of Baroda, and to sign the renewal/enhancement documents time to time required by Bank of Baroda, Ambattur branch."
33. Before the Debts Recovery Tribunal-I, Chennai the defendants 1 to 6 and 8 have not cross-examined the Bank witnesses and they have also not filed any documents on their side to dislodge the claim made in the original application against them and in short, 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 first respondent/appellant/ 7th defendant has not cross-examined the writ petitioner/Bank witnesses before the proceedings in O.A.No.41 of 1997 on the file of Debts Recovery Tribunal-I Chennai, and also that he has not filed any counter proof affidavit repudiating the proof affidavit filed by the Bank, with respect, we are not in agreement with the conclusion arrived at by the second respondent/Debts Recovery Appellate Tribunal, Chennai to the effect that "the First Defendant in O.A.No.41 of 1997 has misused his position by making use of the first respondent/appellant/ 7th defendant and his title deeds and created the documents for loan obtained by him etc.," and the same is not based on the facts and circumstances and also not borne out by available materials on record. As a matter of fact the liability of a surety is coextensive with that of the Principal Debtor and the same is instantaneous as per
Section 128 of the Indian Contract Act 1872. At the cost of repetition, suffice it for this Court to point out that the first respondent/appellant/ 7th defendant has arrayed only the writ petitioner/Bank as respondent in R.A.No.48 of 2005 before the Debts Recovery Appellate Tribunal, Chennai and has not arrayed Defendants 1 to 6 and 8 as necessary parties to those proceedings, especially when the relief prayed for by the writ petitioner/Bank in O.A.No.41 of 1997 before the Debts Recovery Tribunal-I, Chennai is for issuance of Recovery Certificate against Defendants 1 to 7 jointly and severally directing the Recovery Officer to recover from them the sum of Rs.34,88,754/- (due under Term Loan-I and Term Loan-II) with the liability of Respondents 2 to 5 being limited to the sum of Rs.9,10,771/- (due under the Term Loan-I) with future interest thereon at the rate of 20.75% per annum with quarterly rests from 23.08.1995, (the date of Plaint) till the date of realisation in full and for the sum of Rs.26,02,717 (due under Packing Credit II) with the liability being limited to Respondents 1, 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 opinion of this Court. In short, we are of the earnest view that persons shown as necessary parties to O.A.No.41 of 1997 on the file of Debts Recovery Tribunal-I, Chennai are necessary parties to the appeal proceedings in R.A.No.48 of 2005 on the file of Debts Recovery Tribunal-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 Recovery Appellate Tribunal Chennai, as framed by the first respondent/appellant/ 7th defendant and filed by showing only the writ petitioner/bank as a respondent/party to the said proceedings, is not a properly framed one. Therefore, in the light of our detailed discussions mentioned supra and on an over all assessment of the facts and circumstances of the case in a cumulative manner, we are inclined to allow this present writ petition and accordingly allows this writ petition by setting aside the order of the second respondent/Debts Recovery Appellate Tribunal, Chennai passed in R.A.No.48 of 2005 dated 03.01.2006 to prevent an aberration of justice. Accordingly we remit back the R.A.No.48 of 2005 to the Debts Recovery Appellate Tribunal by directing the First Respondent/Appellant/ 7th Defendant to implead Defendants 1 to 6 and 8 as necessary parties to R.A.No.48 of 2005 before the Debts Recovery Appellate Tribunal Chennai, since they are the parties to the proceedings in O.A.No.41 of 1997 on the file of Debts Recovery Tribunal-I, Chennai and the second respondent/Debts Recovery Appellate Tribunal, Chennai is directed to deal afresh the R.A.No.48 of 2005 on merits uninfluenced with any of the observation made by this Court in this writ petition and to dispose of the same as expeditiously as possible, after providing due opportunities to the parties concerned and also taking note of the fact that the First Respondent/Appellant/ 7th Defendant is reported to have paid a total sum of Rs.4.78 lakhs as observed by the second respondent at paragraph 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 above terms. Considering the facts and circumstances of the case there shall be no order as to costs.
prm To The Registrar, DEBTS RECOVERY APPELLATE TRIBUNAL, Indian Bank Building, Ethiraj Salai, Egmore, Chennai 8