IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 22ND DAY OF APRIL, 2019 BEFORE THE HON’BLE MR. JUSTICE N.K. SUDHINDRARAO REGULAR SECOND APPEAL No.2196/2010 BETWEEN:
Sri Shivanna Aged about 43 years s/o Chickegowda resident of Kaduvinahosalli village Halekote Hobli Holenarasipura Taluk Hassan District – 573 116.
(By Sri Abhinav R for M/s. Kumar & Kumar, Advocates) AND:
1. Hemavathi Co-operative Sugar Factory Ltd. Srinivasapura Channarayapatna Taluk Hassan District-573116 Represented by its Managing Director.
2. The Hassan District Co-operative Central Bank Ltd.
Bangalore – Mangalore Road, …Appellant Hassan-573 201 Represented by its Chairman.
3. The General Manager The Hassan District Co-operative Central Bank Ltd., Bangalore – Mangalore Road, Hassan – 573 201.
4. The Manager The Hassan District Co-operative Central Bank Ltd., Holenarasipura Branch, River Bank Road Hassan District – 573 201.
…Respondents (Respondents served and unrepresented) This Regular Second Appeal is filed under Section 100 of the Code of Civil Procedure against the Judgment and decree dated 17.04.2010 passed in R.A. No.80/2008 on the file of the Presiding officer, Fast Track Court, Channarayapatna, allowing the appeal and setting aside the judgment and decree dated 23.11.2007 in OS No.57/2003 on the file of the Civil Judge (Sr.Dn.), Channarayapatna.
This Regular Second Appeal coming on for hearing, this day, the Court delivered the following:
J U D G M E N T The appeal is directed against the judgment and decree passed by Fast Track Court, Channarayapatna, dated 17.04.2010 in R.A.No.80/2008 wherein judgment and decree passed by the Civil Judge (Sr.Dn), Channarayapatna in O.S. No.57/2003 on 23.11.2007 was partly confirmed.
2. For the purpose of convenience, the parties are referred to as per their respective ranks before the trial Court.
3. The facts of the case, as narrated in the plaint are as under:
The Plaintiff, who was a sugarcane grower had supplied 84,980/- Kgs of sugarcane grown by him to the 1st defendant factory on 21.11.2002, for which, the 1st defendant was required to pay a sum of Rs.52,285/- towards the value of the said sugarcane to the Plaintiff.
4. Instead of paying the said amount to the plaintiff, the 1st defendant factory gave a cheque for a sum of Rs.52,285/- to the 4th defendant with a request to transfer/adjust the said amount to the plaintiff. Neither the 1st defendant nor defendants-2 to 4 paid the said amount to the plaintiff.
5. The plaintiff had no manner of transaction with the defendants 2 to 4. The act of defendant No.1 in diverting the funds to defendant No.4 is illegal. The plaintiff filed a suit for recovery of Rs.68,700/- including damages, interest, notice fee and other miscellaneous charges, against defendants-1 to 4.
6. The 2nd defendant who though served, remained un-represented before the trial Court and placed ex-parte.
7. It is the case of the defendant No.1 that the plaintiff has supplied sugarcane to the 1st defendant-factory and in that regard, they issued cheque for consolidated amount of Rs.3,18,780/- towards value of the sugarcane of 6 farmers vide cheque No.35308 through the 4th defendant and requested defendant No.4 to pay a sum of Rs.52,285/- directly to the plaintiff or to his account maintained in SBM, at Holenarasipura. In spite of it, defendant Nos. 2 to 4 have not paid the said amount to the plaintiff. Therefore, defendant No.1 is not liable to pay the said amount. As such, the 4th defendant is bound to pay/reimburse the same to the plaintiff.
8. Defendant Nos. 3 & 4 have filed their common written statement. While admitting the fact that the 1st defendant had indeed issued cheque through defendant No.4, they contended that the plaintiff and other members of his family have borrowed the loan from PACC, Kattebeliguli, by hypothecating the crop grown in their joint family property. As, the plaintiff and other members of his family have not repaid said loan amount to PACC, it requested the defendant Nos.3 and 4 to pay the amount deposited by defendant No.1 directly to the loan account of the plaintiff.
9. On the basis of the request made by PACC., defendant Nos. 3 & 4 withhold the amount payable to the plaintiff. It was further contended that defendant Nos. 3 & 4 have got primary interest to recover the amount due from the debtors of the Bank. Plaintiff was aware that the defendants have legally and correctly adjusted amount to the plaintiff’s loan account and hence, the 4th defendant withheld his amount and hence, the suit filed by the plaintiff was a frivolous suit. Therefore, the question of making payment to the plaintiff does not arise at all.
10. The trial Court, on evaluating the oral and documentary evidence adduced by the parties, by its judgment dated 23.11.2007 held that the defendant Nos. 3 & 4 have failed to prove that the plaintiff has obtained loan from P.A.C.C., Bank and the defendant No.3 & 4 have no right to forfeit the amount payable to the plaintiff and consequently, decreed the suit of the plaintiff in part.
11. Challenging the said judgment, the 1st defendant-sugar factory alone has preferred appeal in R.A. No.80/2008. The learned Judge of the first appellate Court, by the impugned judgment dated 17.04.2010, allowed the appeal, setting aside the judgment and decree dated 23.11.2007 passed by the trial Court and consequently, dismissed the suit of the plaintiff on the ground that though the defendant No.1 had issued a cheque for payment of the amount payable to the plaintiff towards supply of sugarcane, the said amount was appropriated by the defendant Nos. 2 to 4 towards the outstanding loan amount due by the plaintiff to PACC Bank, by exercising general lien. Being aggrieved by the same, the plaintiff is before this Court.
12. While admitting the above appeal for consideration on 21.02.2019, this Court has formulated the following substantial questions of law:
i) Whether the rule of appropriation of payment applies to cases where amount payable by a purchaser is diverted to a creditor who claims dues from the seller?
ii) whether the first respondent was legally authorized to transfer the proceeds payable to appellant to respondent No.4?
13. Learned counsel for the appellant-plaintiff submits that in the absence of any documentary or oral evidence to substantiate the fact that the defendant No.4 had obtained any authorization from the plaintiff to adjust the sale proceeds of sugarcane towards outstanding loan due, the defendant No.4 cannot unilaterally recover the amount payable to the plaintiff towards costs of sugarcane supplied by him to the defendant No.1. Hence, impugned judgment passed by the first appellate Court is illegal and liable to be set aside.
14. The respondent Nos.1 to 4, despite service of notice, have remained un-represented before this Court.
15. On perusal of the pleadings of the parties and submissions made by the learned counsel, the controversy amongst the parties revolves around the question as to whether the 4th defendant, in the absence of any authorization from the plaintiff-appellant, was justified in withholding the amount payable to the plaintiff by the 1st defendant towards supply of sugarcane for adjustment of loan due to PACC bank which is a subsidiary bank of the 4th defendant.
16. On consideration of the documentary and oral evidence available on record it is manifestly clear that the 1st defendant, in its written statement has categorically admitted that the plaintiff had indeed supplied sugarcane and in that regard it had issued a consolidated cheque for a sum of Rs.3,18,780/- towards the value of sugarcane of six farmers, drawn on the 4th defendant bank for disbursement of the respective farmers. It was further specifically contended by the 1st defendant that it had addressed several letters to the 4th defendant requesting it to repay the same to the plaintiff. It is not at all the case of the 4th defendant that the plaintiff owed debt to it and the said amount was recovered for adjustment of such debt. On the contrary, it has been stated in the written statement that the same has been deducted at the request of PACC bank, a subsidiary bank of defendant No.4.
17. There is no evidence to show that the plaintiff had executed an undertaking or authorization either to defendant No.4 or PACC bank for such adjustment of the amount. In the absence of such, undertaking or authorization, the defendant No.4 has no right to unilaterally recover the amount payable by the 1st defendant to the plaintiff towards cost of sugarcane supplied by him.
18. If any amount due to the 4th defendant towards outstanding loan payable by the plaintiff, the appropriate remedy available to 4th defendant would be to recover the same in due process of law.
19. Considering the entire material on record and in the over all circumstances of the case, I find that the rule of appropriation of payment does not apply to the facts of the present case, in the absence of authorization or undertaking issued by the Plaintiff to defendant No.4. The learned judge of the first appellate Court erred in reversing the judgment rendered by the trial Court and dismissing the suit. I find that the appellant has made out good grounds to interfere with the findings recorded by the First Appellate Court, under Section 100 of the Code of Civil Procedure. The substantial questions framed are answered accordingly. Consequently, the appeal deserves to be allowed.
20. In the result, the appeal is allowed. The judgment and decree dated 17.04.2010, passed by the learned Presiding Officer, Fast Track Court, Channarayapatna, in R.A. No.80/2008 is hereby set aside. The judgment and decree dated 23.11.2007 passed by the Civil Judge (Sr. Dn), Channarayapatna, in O.S.No.57/2003 is hereby confirmed.
There is no order as to costs.
Sd/- JUDGE Vr.