IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 7TH DAY OF NOVEMBER 2019 BEFORE THE HON’BLE Dr. JUSTICE H.B.PRABHAKARA SASTRY R.F.A.No.859 OF 2014 BETWEEN:
Muthoot Finance Ltd., R.T.Nagar Branch, No.75, Apoorva Complex, Dinnur Main Road, Behind R.T.Nagar Police Station, R.T.Nagar, Bangalore-560 032, Rept. by its Authorised Officer, Sri Ramachari H.S. .. Appellant ( By Sri Venkataramana K.S., Advocate ) AND:
Sri. Ravitheja K.V. S/o Venkatramana K. Aged about 24 years, R/at No.5, 9th Cross Road, Bhuvaneshwarinagar, Bangalore North, Bangalore-560 032. .. Respondent ( By Sri G.Raghunandan, Advocate ) This Regular First Appeal is filed under Section 96 of CPC against the judgment and decree dated 7.3.2014 passed in O.S.No.5396/2012, on the file of the XX Addl.City Civil & Sessions Judge, Bangalore, dismissing the suit for recovery of money.
This Regular First Appeal coming on for Hearing, this day, the Court delivered the following:
JUDGMENT This is the plaintiff’s appeal. The present plaintiff had instituted a suit against the present respondent arraigning him as defendant in O.S.No.5396/2012, in the Court of learned XX Addl.City Civil & Sessions Judge (CCH-32), Bengaluru City, (hereinafter for brevity referred to as `trial Court’), for recovery of a sum of `2,29,507/- with interest at the rate of 29% p.a. thereupon.
2. The summary of the case of the plaintiff in the trial Court was that, it is a non-Banking Finance Company, registered under the Companies Act, 1956, and dealing in financial business, including lending money against gold. The defendant by offering a gold necklace, weighing 93.40 grams, as collateral security to it, availed a gold loan of a sum of `1,96,500/- on 28.12.2011. The loan amount was released to him on the very same day. The defendant had agreed to repay the said loan amount to the plaintiff on demand and agreed to pay the interest. The defendant executed the required documents in this regard.
It is the further case of the plaintiff that on the date 27.1.2012, Kadugondanahalli Police visited the plaintiff’s Company and informed them that the golden necklace pledged by the defendant as a collateral security while availing the loan was a stolen article. The defendant along with his friends had committed theft of number of gold ornaments in the house of one Subash and one such article was pledged with the plaintiff’s Company by the defendant while availing the loan.
In this connection, a Crime No.5/2012 and FIR No.35 was also shown to have been registered with the Kadugondanahalli Police Station on 25.1.2012. By giving the said information to the plaintiff, the said police seized the golden necklace by drawing a seizure panchanama in the presence of witnesses on 27.1.2012 and subjected the property to Property Form No.23/2012 of K.G.Halli Police Station. The plaintiff was not aware of the previous history behind the necklace, but, as a bona fide businessman, has granted the gold loan based on the collateral security of the golden necklace. However, the defendant has deceived it by suppressing the true facts.
It is the further case of the plaintiff that it demanded from the defendant the repayment of the loan along with interest thereupon, however, the defendant failed to repay the loan amount and the interest thereupon. Thus, having no other option, the plaintiff was constrained to institute the suit. The plaintiff has claimed a sum of `1,96,500/- as the principal amount and a sum of `33,007/- as interest at the rate of 29% p.a. from 28.12.2011 till the date of filing of the suit, thus, in total a sum of `2,29,507/- with interest thereupon.
3. In response to the summons served upon him, the defendant appeared through his counsel and filed his written statement. In his written statement, the defendant has denied all the plaint averments and more particularly, the averment that he had availed a loan of `1,96,500/- from the plaintiff. He contended that at any point of time, neither he approached the plaintiff- Company nor availed any loan against gold. He has also denied that he had execut ed any document towards the alleged loan transaction.
The defendant further contended that no criminal case was filed against him by the police with respect to the alleged theft of golden ornaments. On the contrary, the Manager of the plaintiff-Company along with other people was visiting his house causing inconvenience and also they were threatening them, as such, his mother had lodged a complaint against the plaintiff and its officials in the Hebbal Police Station on 27.2.2012. The police had called the concerned and had suitably advised them not to harass the defendant in any manner. With this, the defendant denied the plaint averments, as well his alleged liability towards the plaintiff.
4. Based on the pleadings of the parties, the trial Court framed the following issues :
1) Does the plaintiff company prove that the defendant had availed a loan of Rs.1,96,500/- from plaintiff company by offering the gold ornaments like necklace etc., weighing 93.4 gms. As collateral security on 28.12.2011?
2) Does the plaintiff company further prove that at the time of availing the gold loan the defendant has executed terms and conditions letter, receipt of loan amount and other necessary documents as alleged?
3) Does the plaintiff company further prove that subsequently the police recovered the gold ornaments including necklace weighing 93.4 gms. offered as collateral security by the defendant while availing the loan saying that said ornaments were stolen articles?
4) Does the plaintiff company entitled to recover Rs.2,29,507/- against the defendant as claimed?
5) Whether the plaintiff company is entitled for interest? If so, at what rate?
6) What order or decree?
The plaintiff got examined one Sri S.Narayana Shibaraya, its authorised person and Special Power of Attorney Holder as PW-1 and got marked documents from Exs.P-1 to P-19. The defendant got himself examined as DW-1 and got marked documents from Exs.D-1 to D-3.
After hearing both side, the trial Court by its judgment and decree dated 07.03.2014, while answering issue Nos.1 to 5 in the negative, dismissed the suit of the plaintiff. It is against the said judgment and decree, the plaintiff has preferred this appeal.
5. Lower Court records were called for and the same are placed before this Court.
6. Heard the arguments of the learned counsel for the appellant. In spite of granting sufficient opportunities, the learned counsel for the respondent neither appeared in this matter nor addressed his arguments.
7. Perused the materials placed before this Court, including the memorandum of appeal, impugned judgment and decree and the lower Court records.
8. For the sake of convenience, the parties would be referred to as per their ranks before the trial Court.
9. In view of the above, the points that arise for my consideration are :
1) Whether the plaintiff-Company has proved that the defendant had availed a loan of `1,96,500/- from it on 28.12.2011 on the collateral security of a golden necklace weighing 93.4 grams?
2) Whether the plaintiff proved that the said golden necklace was considered to be a stolen article and was seized by Kadugondanahalli Police?
3) Whether the plaintiff is entitled for the suit claim?
4) Whether the judgment and decree under appeal deserves any interference at the hands of this Court?
10. PW-1 in his examination-in-chief filed in the form of affidavit evidence has reiterated the plaint averments. In order to show that the defendant had availed a loan from it on the collateral security of golden necklace, the plaintiff got produced and marked a document shown to be an undertaking-cum-sanction letter dated 28.12.2011 at Ex.P-2. He produced several other documents, including an application for personal loan at Ex.P-3, a document said to be `Know Your Customer’ at Ex.P-4, photocopy of EPIC card (voters ID) said to be of defendant at Ex.P-5, a true copy of FIR No.35 of Kadugondanahalli Police Station, Bengaluru, at Ex.P-6, a copy of the complaint before the same police in the same crime at Ex.P-7, a copy of Property Form in the same crime of the very same police at Ex.P-8, a copy of an alleged voluntary statement of accused in the same crime at Ex.P-9, a copy of seizure panchanama said to have been drawn by the very same police in the very same crime at Ex.P-10, a document shown to be the details of gold ornaments to be handed over to the police and executed by the plaintiff-Company at Ex.P-11, a copy of the Circular of the plaintiff-Company dated 25.9.2008 at Ex.P-12, the statement of account of the defendant maintained by the plaintiff-Company at Ex.P-13, a copy of the application for personal loan said to have been filed by one Sri Raju R. to the plaintiff- Company at Ex.P-14, an undertaking-cum-sanctioned letter of the plaintiff-Company with respect to the said Sri R.Raju at Ex.P-15, declaration for lost gold loan token said to have been executed by the said R.Raju at Ex.P-16, a document said to be of `Gold Loan Pawn Ticket Lost’ at Ex.P-17, copy of Cashier’s Scroll at Ex.P-18 and copy of Manager’s Cash Scroll at Ex.P-19.
PW-1 was subjected to a detailed cross- examination from the defendant’s side, wherein he adhered to his original version.
11. The defendant as DW-1 in his examination-in- chief filed in the form of affidavit evidence has reiterated the contentions taken up by him in his written statement. He has specifically denied that he had availed any loan from the plaintiff-Company by offering a collateral security of a golden necklace on 28.12.2011. He reiterated his contention that originally the gold loan was taken by one Sri R.Raju on 27.8.2011 from the plaintiff-Company for a sum of `1,80,000/-. The plaintiff-company closed the said loan account of Sri R.Raju on 28.12.2011. However, no loan was extended to him (DW-1) on 28.12.2011, but, by showing in their Books of Accounts that the loan was granted in his favour (DW-1) on the said day, the plaintiff has made false entries and the alleged transaction was only a book adjustment made by the plaintiff-Company. He further submitted that the Manager of the plaintiff-Company, joined by retired Police Officer, was visiting his house and was threatening him, which made his mother (of the witness) to lodge a complaint before the Hebbal Police Station on 27.2.2012 against the plaintiff’s Company and others. The defendant reiterated that he had not availed any loan from the plaintiff-Company.
In his support, he has produced and got marked the copy of the police complaint lodged by his mother – Smt.K.Kalavathi with Hebbal Police Station at Ex.D-1, a copy of the acknowledgement issued by the police at Ex.D-2 and an endorsement shown to have been issued to the complainant at Ex.D-3.
12. In the light of the above, it was the argument of learned counsel for the appellant that the execution of the loan document and other necessary documents by the defendant in favour of the plaintiff has been clearly explained and established by PW-1 in his evidence. The said fact has further being established in the cross-examination of DW-1, as such, the loan transaction between the parties has been duly established. It is also not in dispute that the golden necklace which was offered by the defendant at the time of availing the loan was proved to be stolen, as such, the same was seized by the police. Thus, the defendant, as a customer, having produced the stolen article has misled the plaintiff-Company and availed a loan of `1,96,500/-. As such, the defendant is liable to pay the said amount together with interest thereupon.
13. The defendant has not denied that the plaintiff- Company is a non-Banking Finance Corporation and one of its major activity is lending of money by accepting the gold as a collateral security. The said plaint averment, as well the evidence of PW-1 in that regard has not been specifically denied by the defendant. Therefore, it remained undenied that the plaintiff-Company is a non-Banking Finance Corporation and as a major part of its business activity, it lends loan on the basis of collateral security in the form of gold offered by the applicants/loanee. The plaint averment, as well the evidence of PW-1 is that the defendant approached the plaintiff-Company on 28.12.2011 and offering the collateral security of a golden necklace, weighing 93.4 grams, had availed a loan of `1,96,500/-. In that regard, the plaintiff has produced an application for personal loan, which is at Ex.P-3, which go to show that one Sri Raviteja K.V. (the defendant), has applied to the plaintiff-Company for a loan of a sum of `1,96,500/- by offering a golden necklace, weighing 93.4 grams. Ex.P-2 which is a document maintained by the plaintiff- Company in the form of an undertaking-cum-sanction letter go to show that, accepting the loan application and the collateral security offered by the defendant, the plaintiff-Company had sanctioned him a loan of `1,96,500/- as a personal loan on 28.12.2011. However, the same witness i.e., PW-1 in his further cross-examination has admitted a suggestion as true that, earlier to 28.12.2011, the plaintiff-Company had sanctioned a personal loan in the name of Sri R.Raju, for a sum of `1,80,000/- on the collateral security of golden necklace, weighing 93.4 grams. However, the witness denied a suggestion that it was the very same loan transaction which was subsequently transferred in the name of the present defendant only as a book adjustment. Thus, PW-1 not only denied the defence taken up by the defendant, but, reiterated the plaintiff’s contention in his evidence as PW-1.
PW-1, however in his further cross-examination admitted a suggestion as true that, earlier to 28.12.2011, one Sri R.Raju had availed a loan on the very same golden necklace which was seized by the police. Even though the witness has admitted that one Sri R.Raju had availed a loan on the very same necklace earlier to the present suit transaction, still, the defendant by confronting the documents at Exs.P-14 to P-19 to the witness, got it further confirmed. As already observed in Ex.P-14, the loan application filed by one Sri R.Raju with the plaintiff-Company seeking a loan of `1,80,000/- and offering a collateral security of a golden necklace, weighing 93.4 grams. Ex.P-15 is the undertaking-cum-sanction letter by the plaintiff, sanctioning the said loan to the said applicant Sri R.Raju. Ex.P-16 is a declaration for loss of gold token, wherein the said R.Raju is shown to have stated that he has misplaced or lost gold loan token issued to him by the plaintiff-Company when he had availed a loan of `1,80,000/-. Ex.P-17 is one more similar letter, wherein the said Sri R.Raju is shown to have requested the plaintiff-Company to release the ornament in his favour even in the absence of gold loan ticket. PW-1 has admitted that all these documents pertain to loan transaction of the plaintiff-Company with said Sri R.Raju.
14. The said admission on the part of PW-1 clearly go to establish that prior to the alleged loan transaction with the present defendant dated 28.12.2011, the very same plaintiff-Company had granted a personal loan on the very same collateral security article in favour of one Sri R.Raju on 27.8.2011 and had granted him a loan of `1,80,000/-. However, by that evidence of PW-1 itself, it cannot be deduced that the subsequent loan transaction in favour of the defendant by the plaintiff was a mere book adjustment and no such loan transaction has taken place. Even though the closure of the loan account of Sri R.Raju and sanctioning of the loan in favour of the present defendant has taken place on the very same day and that the collateral security offered in both the transactions are one and the same article, but, by that itself, it cannot be deduced that there was no second loan transaction between the plaintiff and the defendant. When it is not the case of the defendant that during the subsistence of the loan account of said Sri R.Raju, the alleged loan in favour of defendant was sanctioned, but, on the other hand, even the case of the defendant is also that prior to the alleged loan in favour of the defendant, the loan account of the said Sri R.Raju was shown as `closed’ and the article was released to him, then, there would be no basis to accept the contention of the defendant that the loan in favour of the defendant was merely a book adjustment and no actual transaction of the loan in that regard had taken place. Therefore, the contention of the defendant that was taken in the Court below, which was accepted by the Court below that the alleged loan transaction in favour of the defendant was a mere book adjustment, is not acceptable.
15. Even though the contention of the defendant that the alleged transaction was a book adjustment was accepted, by that itself, it cannot be deduced that the plaintiff has proved the alleged loan transaction with the defendant. The said loan transaction by the plaintiff with the defendant is also required to be established by the plaintiff. In that regard, as already observed above, the plaintiff-Company has produced Exs.P-2, P-3, P-4 and P-5. Those documents were confronted to DW-1 in his cross-examination. DW-1 has denied of he executing those documents, but, stated that the signatures on those documents are similar to that of his signature. However, the very same witness in his very same cross-examination has admitted as true that before institution of the suit, the plaintiff had approached him and requested him for the repayment of the loan amount. The plaintiff being a registered non- Banking Financial Company, normally it cannot be assumed that for no reasons and with no documentation, it simply goes to a person and demands for the repayment of the money. Even though DW-1 has produced Exs.D-1 to D-3, the same would go to show that the mother of the defendant had submitted a complaint with the Hebbal Police Station, Bengaluru, against the plaintiff-Company stating that they were frequently visiting her, pestering for the repayment of the loan. The police endorsement at Ex.D-3 go to show that the police based on the said complaint, had summoned the officer of the plaintiff-Company and advised them not to harass the complainant. The said fact further go to show that the plaintiff-Company had visited several times the defendant before filing this suit demanding repayment of the loan amount from him. Thus, the case of the plaintiff that the defendant had availed a loan by executing the documents at Ex.P-2 and also by making an application as per Ex.P-3 appears to be more probable.
16. In addition to the above, the defendant has admitted his signature at Ex.P-10 and stated that the said signature was obtained by the police on the seizure panchanama on 27.1.2012. It is not the case of the defendant that without going into the contents of the said panchanama or without understanding the contents of said panchanama, he had signed the said panchanama. A reading of Ex.P-10 would go to show that the K.G.Halli Police have registered a complaint in their Station Crime No.5/2012, for the offence punishable under Section 379 of Indian Penal Code. During their investigation, they had arrested one Manjunatha, an accused, and also the defendant Raviteja and shown them before the panchas stating that the said Manjunatha, joined by his accomplice, had committed theft in the house of one Subash and had shared the booty, out of which, the ornaments that had come to the share of Manjunatha were pledged by said Manjunatha in Muthoot Finance (plaintiff-Company) through the present defendant (Raviteja). It is further shown in the panchanama that the said Manjunatha and Raviteja have led the panchas to the plaintiff-Company and got produced the golden necklace, which incidentally according to the plaintiff was offered as a collateral security by the defendant when he is said to have availed a loan of `1,96,500/- on 28.12.2011. The police by drawing a seizure panchanama on 27.1.2012, seized the said necklace in the presence of the present defendant Raviteja and the panchas. The said document though was relied upon by the plaintiff as a part of its evidence and when confronted to DW-1, the same was not specifically denied by the defendant. On the other hand, as already observed above, the defendant admitted that said Ex.P-10 bears his signature.
17. Therefore, the evidence of PW-1, coupled with Exs.P-2, P-3, P-4, P-5 and P-10 go to show that the defendant had offered the golden necklace, weighing 93.4 grams to the plaintiff on 28.12.2011 and had availed a loan of `1,96,500/-. This aspect the trial Court did not appreciate in its proper perspective. Merely because the very same article was said to have been earlier pledged by another person by name Sri R.Raju and merely because PW-1 is said to have admitted a suggestion as true in that regard, the trial Court was carried away by the said statement of PW-1 and suspected the subsequent loan transaction that has taken place between the plaintiff and the defendant.
The trial Court in the said process did not notice that, merely because a particular article is said to have been pledged by another person would in any way prevent the subsequent holder of the very same article to offer it as collateral security with a financier (plaintiff herein). Therefore, it is clear that the plaintiff has proved that the defendant by offering the golden necklace, weighing 93.4 grams as collateral security, had availed a loan of `1,96,500/- from the plaintiff on 28.12.2011.
18. The very same evidence of PW-1, DW-1 and more particularly Ex.P-10 and admission of the signature on Ex.P-10 by DW-1 would further go to show that the collateral security offered by the defendant to the plaintiff in the loan transaction under dispute was shown to be a stolen article, with respect to which, a police complaint was filed and the police seized the said article during the course of their investigation by drawing seizure panchanama as per Ex.P-10. As already observed above, the said seizure was made very much in the presence of the defendant, as such, he too has subscribed his signature on the said document. Admittedly, the defendant has not disputed either the alleged seizure panchanama or the contention of the plaintiff that the said golden necklace was a stolen article, as such, the police have seized it during the course of the investigation for its further process.
Thus, the fact stands proved is that the collateral security offered by the defendant in the form of a golden necklace was proved to be a stolen article, as such, the defendant was not the true owner of the said article. Thus, when the defendant not being the true owner of the pledged article, has availed a loan by offering the said golden necklace as collateral security, on the other hand, when the Law Enforcing Authority (the police herein) have in due process of law seized the said article in a criminal case, then, it was open for the defendant to seek the possession of the said article to be returned to him by making necessary application before the competent Magistrate trying the criminal case either under Section 451 or Section 452 of Code of Criminal Procedure, provided he had any lawful claim over it.
19. In the instant case, admittedly the defendant after seizure of the said golden necklace in his presence and to his knowledge, has not made any such attempt to assert his ownership on the article or to claim its possession back. Therefore, the defendant, as a loanee, who had offered the very same golden article as a collateral security, has not claimed back the article on possessing the knowledge that he was not the true owner of that article. On the other hand, to his knowledge, admittedly the said article was seized by the police to deal with the same in accordance with law. This development with respect to collateral security which has taken place subsequent to the defendant availing a loan from the plaintiff could not in any way prevent the right of the plaintiff to demand for repayment of the loan amount from the defendant. Admittedly, it is not the case of the defendant that he had repaid any portion of the loan amount to the plaintiff. On the other hand, the defendant has totally denied the alleged loan transaction itself. Since the loan transaction now has been stood established and admittedly the defendant has not repaid any portion of the loan amount to the plaintiff, the entire principal amount of `1,96,500/- remains as a due payable by the defendant to the plaintiff.
20. In addition to the above, it also to be noticed that in the cross-examination of PW-1, dated 5.9.2013, at Page-7, a suggestion was made to the witness as below :
“ ¥ÀæPÀgÀtzÀ°è ¸Á® PÉÆnÖzÀÄÝ, ¸ÉPÀÆågïØ ¸Á® DVgÀÄvÀÛzÉ C£ÀÄߪÀÅzÀÄ ¤d. Dgï.©.L UÉÊqï¯ÉÊ£ïì ªÀivÀÄÛ EvÀgÉ PÁ£ÀÆ£ÀÄUÀ¼À ¥ÀæPÁgÀ £ÁªÀÅ ¸ÉPÀÆågïØ ¯ÉÆãï DzÀ PÁgÀt F ¸Á®PÉÌ ±ÉÃ.14 QÌAvÀ ºÉaÑUÉ §rØ DPÀgÀuÉ ªÀiÁqÀ®Ä §gÀĪÀÅ¢®è CAzÀgÉ ¸ÀļÀÄî.”
(Emphasis supplied) The translation of the above in English would read as below:
“ It is true that the loan given in this case was a secured loan. It is not true to suggest that since the loan was a secured loan, the rate of interest cannot exceed 14% as per RBI Guidelines and other Laws”
(Emphasis supplied) The said suggestion made to the witness by the defendant clearly go to show that the defendant has stated that the loan was given in this transaction. Thus, the said suggestion made to PW-1 also supports the case of the plaintiff that defendant had availed a loan from it.
21. The plaintiff has claimed interest at 29% on the said amount from the defendant. A perusal of the loan documents, more particularly, Ex.P-2, would no where go to show that the defendant had agreed for the said rate of interest payable on the loan amount. Barring Ex.P-2, there are no other documents which could show that the defendant had agreed to pay any particular rate of interest on the repayment of the loan amount.
Learned counsel for the appellant in his argument drawing the attention of this Court to the cross- examination of PW-1 submitted that, a suggestion was made to the witness suggesting that as per RBI Guidelines and other Laws, the interest on the secured loan cannot exceed 14%. With this, he submitted that the defendant by making the said suggestion has admitted that the minimum rate of interest would be 14% p.a., as such, the same rate of interest be ordered.
The said argument of the learned counsel is not acceptable for the reason that, merely because a suggestion was made to the witness that a secured loan can fetch a maximum interest of 14% p.a. does not mean that the defendant, as a loanee, had accepted for the payment of any percentage of rate of interest. Had really any such rate of interest, which according to the plaintiff was at 29% p.a., been agreed by the defendant, then, the plaintiff was expected to have recorded the same in any of the documents, including Ex.P-2. Admittedly, there is no whisper about such rate of interest either in Exs.P-2, P-3 or in P-4. Therefore, the claim of the plaintiff for the interest at the rate of 29% p.a. is without any basis, as such, it is not justifiable.
However, at the same time, it cannot be ignored of the fact that the money lending on the collateral security of the gold was one of the main business activity of the plaintiff-Company. As such, the loan of `1,96,500/- extended by it to the defendant in the instant case cannot be considered as free of any interest. Since even according to the plaintiff the said loan was a personal loan given to the defendant and in the circumstances of the case, wherein no documents speak about any agreed rate of interest, I am of the view that, though the plaintiff is entitled for the interest on the loan amount lent by it to the defendant, but, its rate be confined to 6% p.a. from the date of loan transaction till the date of realisation.
22. As observed above, the trial Court without appreciating the evidence paced before it in its proper perspective since has carried away by the fact that prior to the present loan transaction, with respect to the same security, another loan was granted, had concluded by treating the present loan transaction as a mere book adjustment and by answering the relevant issues in the negative, dismissed the suit. Since the said finding of the trial Court now proved to be erroneous and on the other hand, the plaintiff has made out its case entitling it for a decree, there is necessity to interfere in the judgment and decree under appeal.
23. Accordingly, I proceed to pass the following order:
ORDER The Appeal is allowed. The judgment and decree dated 07.03.2014, passed by the learned XX Addl.City Civil & Sessions Judge (CCH-32), Bengaluru City, in O.S.No.5396/2012, is set aside. The suit of the plaintiff is decreed. The plaintiff is entitled to recover a sum of `1,96,500/- from the defendant along with interest thereupon at the rate of 6% p.a. from the date of loan transaction i.e., 28.12.2011, till the date of realisation.
Draw modified decree accordingly.
The Registry is directed to transmit a copy of this judgment along with lower Court records to the lower Court without delay.
Sd/- JUDGE bk/