Wednesday, December 15, 2010

Case Laws :Central Bank of India vs Geetaji Chemical Industries

Sub : The Bankers Evidence Act, 1891


RFA No. 595/2001

Date of Decision: October 10, 2006

! Through : Mr. Vinay Sharma, Adv.


Through : Mr. B.L. Chawla, Adv.


1. Whether reporters of local papers may be 
    allowed to see the judgment? NO

2. To be referred to the Reporter or not? NO

3. Whether the judgment should be
   reported in the Digest? NO


This is a plaintiff's appeal arising out of a suit for
 recovery of money
which the Additional District Judge, Delhi has
 dismissed by the impugned
judgment and decree. The facts giving rise 
to the institution of the suit and
the present appeal may be summarized as under :

2. The defendant respondent No. 1 herein is 
a partnership concern with
respondents No. 2 to 4 as its partners. 
The plaintiff bank's case as set out in
the plaint was that defendant No. 1 firm
 approached the plaintiff for the grant
of a loan facility in connection with the latter's
 business against collateral
securities of Life Insurance Policies, shares 
of Joint Stock Companies,
properties and farm land. 

The plaintiff accordingly sanctioned a cash credit
facility of Rs.50,000/- against hypothecation of stock 
of dyes, chemicals etc.
as well as against the collateral securities mentioned 
above worth Rs.70,875/-.
Requisite documents necessary in this connection
 were executed by the defendant
borrowers which included a Demand Promissory 
Note for Rs.50,000/-, a letter of
continuity, a letter of waiver and an agreement 
of hypothecation to secure
Demand Cash Credit against goods, all dated 
20th June, 1983. The payment of
loan was guaranteed by defendant No. 5 who
 executed a letter of guarantee in
favour of the plaintiff.

3. A fresh set of documents was executed by the
 defendants in June,
1987. Since however the defendants were not 
regular in making payments, they
were informed that they should make payments
 regularly which did not evoke any
response. Communications dated 31st August, 1987
 and 11th September, 1987 were
in that connection sent to the defendants
 in response to which defendants 1 to 4
by their letter dated 18th September, 1987
 assured the plaintiff that they would
submit regular statement of stocks in time 
and adjust the outstanding dues of
the plaintiff in the near future as they were 
expecting their payment very soon.
Letters dated 5th October, 1987, 23rd November, 1987,
 3rd December, 1987 and
19th December, 1987 pointed out the failure 
of the defendants to bring down the
debit balance, submit balance sheet and 
trading account and furnish statements
of hypothecated stocks.

4. The plaintiff's further case is that defendant No. 3, 
acting as
partner of Defendant No. 1 acknowledged the
 debit balance against the firm in a
sum of Rs.1,09,944/- as on 31st December, 1987
 by signing a debit balance
confirmation on the same date, i.e., 31st December, 1987.

 Communications sent
to the defendants thereafter to liquidate the 
outstanding dues also evoked no
response forcing the plaintiff to recall the
 advance in terms of a notice dated
2nd September, 1988. In response, defendants
 No. 2 and 3 executed a fresh set
of documents including a Demand Promissory 
Note, a Letter of Continuity and a
Letter of Hypothecation all dated 29th January, 1990
 for a sum of
Rs.1,41,346.80. Defendant No. 5 once again stood 
surety for the said amount by
issuing a letter of continuing guarantee dated
 29th January, 1990. An
acknowledgment dated 29th January, 1990
 executed in favour of the plaintiff
clearly acknowledged a sum of Rs.1,41,346.80 
inclusive of interest upto 30th
June, 1989 to be due and payable by the defendants.

5. The plaintiff's case in the above backdrop 
was that a sum of
Rs.1,96,834/- was outstanding against the
 defendants as on 19th September, 1991
as evidenced by a copy of the statement of 
account filed with the plaint. The
defendants having failed to repay the said
 amount despite demands, institution
of the suit for recovery of the amount with interest
 pendente lite and future by
sale of hypothecated stocks had become

6. In the written statement filed on behalf of 
the defendants, it was not
disputed that defendant No. 1 was a partnership
 concern, though it was alleged
that the same stood dissolved long back.
 It was also admitted that the
defendants had approached the plaintiff for
 a loan facility for Rs.50,000/- in
the year 1983 which was granted against 
the security of LIC policies, share
certificates etc. The allegation that the 
defendants had signed the documents
in consideration of the said facility was 

 According to the defendants,
they had
signed blank forms and papers at
 the instance of the bank officials at
the time of grant of the facility

Similarly the averment regarding renewal of
the said documents and execution of
 fresh documents in the year 1987 was denied
as the documents referred to in the 
said para were, according to the defendants,
signed by them while the same were blank.

 It was alleged that the defendants had
 instructed the bank to dispose of the share
 certificates and adjust the accounts or in the 
alternative to return the certificates to the
 defendants to enable them to dispose the 
same and to deposit the amount with the 
bank, but the plaintiff bank had failed to 
act in the matter causing financial loss to
the defendants.

 The allegation that the defendants had 
acknowledged the debit
balance of Rs.1,09,944/- as on 31st December, 1987
 was also denied. 

It was alleged that blank forms and papers were 
signed at the instance of the bank
officials in the year 1987 only.

7. Similarly the averment in the plaint that the 
documents were renewed by
execution of a fresh set of documents in 1990 
was also denied and an allegation
made to the effect that the documents relied 
upon were actually signed blank in
June, 1983 at the time the loan facility was extended.
 The acknowledgment of
the outstanding amount in June, 1989 was also
 similarly questioned on the ground
that the same had been created by making use of some blank form which the
plaintiff had obtained at the time of extending the loan facility.

8. On the pleadings of the parties, the trial court framed the following
issues on 6th September, 1997 :

i.Whether the defendants signed on blank form
 and papers as alleged ? OPD

ii.Whether the defendants acknowledged the
 liability? OPP

iii.Whether the plaintiff is entitled to the suit
 amount? OPP

iv.Whether the plaintiff is entitled to the interest?
 If so, at what rate? OPP


9. In support of its case, plaintiff examined
 PW-1 Sh.R.C. Poria. The
defendants did not, however, lead any evidence
 nor appeared to argue the matter.
The court below was, all the same, of the opinion
 that the plaintiff had failed
to substantiate its claim for recovery of the
 suit amount. 

The court was of the view that it was for
 the plaintiff to first prove that the documents
 relied upon by the plaintiff had been executed
 by the defendants in which event alone, 
the defendant could be called upon to 
establish that the same had been signed blank.
The statement of Sh.R.C. Poria did not, according 
to the trial court, help the
plaintiff inasmuch as the same was limited 
to the signing and verification of
the plaint. Aggrieved by the dismissal of the suit, 
the plaintiff bank has
filed the present appeal, as already noticed earlier.

10. Appearing for the appellant, Mr. Sharma 
argued that the view taken by
the trial court was erroneous in law. 
The court below had, according to the
learned counsel, failed to appreciate that
 the signatures on the documents
relied upon by the plaintiff had not been disputed 
by them. All that the
defendants had alleged was that the documents were 
signed when the same were
blank. The onus to prove that assertion was 
upon the defendants as indeed issue
No. 1 clearly placed the onus of proof in regard 
to the said allegation on the
defendants. Defendants having failed to adduce
 any evidence and having failed
even to step into the witness box to support the
 allegation made by them, there
was no option but to hold that the documents
 had been duly signed by the

11. Mr. Sharma further argued that the court 
below had failed to notice
the fact that the plaintiff had proved the duly 
certified copy of the statement
of account marked Ex.PW1/1 and that the said 
statement was admissible in
evidence by itself without any further proof. 
The court had also, according to
the learned counsel, failed to notice that the 
plaintiff had been permitted to
produce secondary evidence by order 
dated 8th December, 1999 in view of the fact
that the original documents had been lost and could not,
 therefore, be placed on
record. The statement of Sh. R.C. Poria, the certified 
copy of the statement of
account showing a debit balance as on the date
 of the institution of the suit
and the documents filed on record pursuant 
to the order of the trial court
dated 8.12.99 coupled with the failure of the 
defendants to lead any evidence to
show that the same were signed blank had, 
according to the learned counsel, made
out a case for passing a decree in favour
 of the plaintiff.

12. On behalf of the respondents, it was on the
 other hand argued that the
evidence on record was insufficient to justify a
 decree and that the trial court
was correct in holding that the plaintiff bank
 had not proved the execution of
the documents on the date they were alleged 
to have been signed and executed.

13. We have given our anxious consideration 
to the submissions made at the
bar and perused the record. 
The statement of PW-1 Sh. R.C. Poria not only
proves the authority of Sh. C.D. Kashyap to
 sign and verify the plaint but also
a certified copy of the statement marked Ex.PW1/1. 
The defendants did not, as
noticed earlier, produce any evidence in rebuttal. 
None of them appeared even to
support the theory that the
documents in question 
on which the signatures were
admitted had been signed while the same were blank.
 The result was that the
allegation that the documents relied upon by 
the plaintiff had been signed while
they were still blank remained unsubstantiated. 

The onus of issue No. 1 framed on the basis of that 
allegation was clearly upon the defendants. 

This implied that in case defendants failed to prove 
the allegation, the documents would betaken as
 having been executed on the dates on which
 they purport to have been executed. 
There was, therefore, no option but to hold
 issue No. 1 against the defendants.

 The necessary corollary from that 
finding would be that the
documents had been executed not on the 
date and in the manner alleged by the
defendants, but as the documents themselves
 purported to have been executed.
Such being the position, there was no room for
 dismissing the suit filed by the
plaintiffs. The documents relied upon by the
 plaintiffs supported by the
certified copy of the statement of account 
constituted sufficient proof for the
plaintiff to succeed in its claim. 

Section 4 of The Bankers Evidence Act, 1891
makes a certified copy of the statement of 
account admissible in evidence
without any formal proof. It reads :

4. Mode of proof of entries in banker's books ? 
Subject to the provisions of
this Act, a certified copy of any entry in a banker's 
book shall in all legal
proceedings be received as prima facie evidence 
of the existence of such entry,
and shall be admitted as evidence of the matters, 
transactions and accounts
therein recorded in every case where, and to the
 same extentas, the original
entry itself is now by law admissible, 

but not further or otherwise.

14. In the light of the above, the suit filed by
 the plaintiff ought to
have been decreed against the defendants
 jointly and severally. In as much as
the court below took a different view, 
it committed a mistake that needs to be
corrected in appeal.

15. In the result, we allow this appeal; set aside

 the impugned judgment
and decree the suit filed by the plaintiff for a

 sum of Rs.1,96,834 with
interest @ 6% pendente lite and till realization. 

The plaintiff shall beentitled to the costs 
of the suit also. 

We further direct that the plaintiff shall be free
 to recover the  amount in question by 
sale of the hypothecated
stocks and the shares pledged to the bank
 by way of collateral securities.

October 10, 2006

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