A. K. SIKRI ( 1 ) PLAINTIFF-CANARA Bank has filed this Suit for recovery of Rs. 604026. 39p against the defendants. Its a mortgaged Suit under Order XXXIV of the Code of Civil procedure and is based on the basis of the following averments :- ( 2 ) PLAINTIFF is a body corporate constituted under the Banking Companies (Acquisition and Transfer and Undertakings) Act, 1970 having its Head office at 112, J. C. Road, Bangalore. It has its branches throughout India including the one at Tagore Garden, New Delhi. Shri T. S. Prabhu is the duly constituted attorney of the plaintiff-Bank is also one of the Principal Officer of the plaintiff-Bank. He is conversant with the facts of the case and as such is in position to depose about the correctness or otherwise of the facts mentioned in the plaint. He has an authority to sign and verify the plaint and instituted the suit on behalf of the plaintiff-Bank. Defendant no. 1 is a proprietorship firm. Shri Inder Kapoor is its proprietor. Defendant no. 2 is a guarantor for the entire advance granted by the Bank alongwith interest and other expenses and is jointly and severally liable. The defendant no. 3 is also guarantor and has mortgaged her property bearing No. RZ-13, Indira Park, out of Khasra no. 643, Village Nasirpur, Delhi. Defendant no. 1 through its proprietor approached the plaintiff-Bank around January, 1987 for grant of certain credit facilities on various form. The proposal submitted by the defendant no. 1 were examined by the plaintiff-Bank and after certain modifications and imposition of various terms and conditions, these were acceded to. ( 3 ) IN January, 1987 the defendant no. 1 through its proprietor applied for loan for purchase of machinery for the manufacturing of paper mint flakes and crystals. The defendant no. 1 offered to deposit 25% margin on machinery. The defendants 2 and 3 undertook to guarantee repayment of the entire amount together with interest and all other charges which may be found due from the defendant no. 1. ( 4 ) IN January, 1987 the defendant no. 1 through its proprietor applied for loan for purchase of machinery for the manufacturing of paper mint flakes and crystals. It offered to deposit 25% margin on machinery. 1. ( 4 ) IN January, 1987 the defendant no. 1 through its proprietor applied for loan for purchase of machinery for the manufacturing of paper mint flakes and crystals. It offered to deposit 25% margin on machinery. The defendants No. 2 and 3 undertook to guarantee repayment of the entire amount together with interest and all other charges which may be found due from the defendant no. 1. The proposal submitted by the defendants was considered by the Bank for sanctioning an advance of rs. 71,000. 00 (Rupees Seventy One thousand only) for purchase of machinery. Accordingly, following documents were executed and delivered by the defendant no. 1 to the plaintiff Bank apart from some other letters of undertakings and declarations filed with the plaint:- i. A Demand Pronote for Rs. 71,000. 00dated 13/03/1987. ii. A stamped hypothecation deed for machinery dated 13/03/1987. iii. A letter of authorisation to remit the proceeds/loan amount to supplier. iv. A letter of authorisation dated 13/03/1987. ( 5 ) THE entire amount of loan was agreed to be repaid in thirty six instalments, alongwith interest as and when it becomes due alongwith other charges, as follows :- rs. 2000x35 = 70,000. 00 rs. 1000x01 = 1,000. 00 total: 71,000. 00 ( 6 ) THE first instalment was to be due w. e. f. April, 1987. The cost of Rs. 71,000. 00 (plus margin money) was paid by the plaintiff-Bank to the suppliers M/s. Refrigerator and Electric Works, New Delhi in March, 1987 towards the cost of the machinery. The amount was paid to the supplier by means of plaintiff-Bank s pay orders. ( 7 ) IT is further averred in the plaint that defendants did not pay their instalments regularly although they utilised the machinery and have been making good profity. As on 28/01/1990 a sum of Rs. 9639. 20p is due to be payable from the defendants jointly and severally. The plaintiff has also claimed future interest from 21/01/1990 17. 5% per annum to be compounded quarterly. ( 8 ) IN addition to the aforesaid amount due by the defendants in machinery loan account, it is. further stated in the plaint that defendants were allowed another credit facility of Rs. The plaintiff has also claimed future interest from 21/01/1990 17. 5% per annum to be compounded quarterly. ( 8 ) IN addition to the aforesaid amount due by the defendants in machinery loan account, it is. further stated in the plaint that defendants were allowed another credit facility of Rs. 3 lakhs in the form of cash credit limit which was extended to the defendants at an interest payable 6% over the bank rate with a minimum of 16% per annum with quarterly rests. To secure the repayment of this advance defendant no. 1 executed in favour of plaintiff-Bank and delivered in favour of plaintiff-Bank the following documents:- i. A demand Promissory Note dated 13/03/1987 for Rs. 3,00,000. 00 agreeing to pay interest at the rate of 6% per annum over Bank rate with a minimum of 16% per annum with quarterly rests. ii. A stamped agreement for opening of Cash Credit (open loan) dated 1 3/03/1987 executed by the defendants hypothecating aall raw materials semi-finished goods, and all commodities belonging to the defendants. iii. A letter of request for overdraft facilities dated 13/03/1987. iv. To further secure the repayment of the loan yet another condition for grant of ML loan and OCC limit by the Bank was that the defendant no. 3 shall mortgage her immoveable property bearing No. RZ-13, Indira Park, out of khasra no. 641, village Nasirpur, Delhi by depositing the title deeds with the bank. Accordingly, the title deeds of this property were deposited by the defendants with an intent to create security for repayment of the ultimate balance in their machinery loan and Cash Credit Hypothecation accounts together with uptodate interest and all other charges. ( 9 ) IT is the case of the plaintiff that defendants did not adhere to the financial discipline and not only failed to submit their stock statements periodically which they were supposed to do as per the terms and conditions of the Agreement dated 13/03/1987, they did not prove their sale proceeds through this account and also failed to liquidate the outstanding in their Cash Credit Hypothecation Account by making necessary deposits. As on 20/01/1990 a sum ofrs. 5,01,161. 19p became due on this account. Plaintiff is claiming further interest after 20/01/199017. 5% per annum to be compounded quarterly. In this way Suit for Rs. 604026. As on 20/01/1990 a sum ofrs. 5,01,161. 19p became due on this account. Plaintiff is claiming further interest after 20/01/199017. 5% per annum to be compounded quarterly. In this way Suit for Rs. 604026. 39 is filed for outstanding amount in the following manner:- ( 10 ) SUMMONS in this Suit were served upon the defendants however as defendants failed to appear they were proceeded ex-parte on 4/05/1995 and the plaintiff was permitted to lead ex-parte evidence by way of affidavit. The evidence was accordingly filed. Documents were also filed and exhibited as EX. Public Witness. 501 1/1toex. Public Witness. 1/28. ( 11 ) IN the affidavit of Shri B. B. Shenoy, Manager, Canara Bank, Tagore Garden branch, the averments made in the plaint are testified. Averments are corroborated by the relevant documents as per which it stands established that defendant no. 1 was given loan facility for purchase of machinery as well as credit facility in the form of cash credit limit. The defendants executed various documents for availing these facilities. These include continuing guarantee by defendant no. 2 in the form of Ex. Public Witness. 1/16 and Public Witness. 1717. Defendant no. 3 also created equitable mortgage of her property bearing No. RZ-13, out of khasra no. 641, village Nasirpur, Delhi by depositing all title deeds i. e. Sale Deed datd 7/04/1972 in favour of plaintiff- bank. Sale Deed/title Deed is Ex. Public Witness. 1/18. Later incidents of depositing all title deeds alongwith schedule A-B are Ex. Public Witness. 1. 19. Affidavit sworn by defendant no. 3 is ex. Public Witness. 1/20. This document created valid and proper mortgage of the property in question in favour of plaintiff-Bank. ( 12 ) FROM the statement of account produced by the plaintiff-Bank it stands established that a sum of Rs. 96,239. 20p was due as on 28/01/1990 in machinery Loan Account and Rs. 5,01,162. 19pin OCC account upto 4/01/1990 alongwith interest amount of Rs. 6,625. 00for the period 5/01/1990 to 28/01/1990. Thus plaintiff is entitled to decree for a sum of Rs. 6,04,026. 39p. The Suit is accordingly decreed for this amount alongwith future interest 18% per annum from the date of filing of the Suit till payment thereof. Defendant no. 1 is liable to pay the sum as principal debtor. Defendant no. 2 is liable to pay the same as guarantor and defendant no. 6,04,026. 39p. The Suit is accordingly decreed for this amount alongwith future interest 18% per annum from the date of filing of the Suit till payment thereof. Defendant no. 1 is liable to pay the sum as principal debtor. Defendant no. 2 is liable to pay the same as guarantor and defendant no. 3 by creating equitable mortgage of her property. All the defendants are thus jointly and severally liable to pay the decretal amount. ( 13 ) AS it is a mortgage Suit filed under Order XXXIX of the Code of Civil Proce ( preliminary decree for Rs. 6,04,026. 39 is passed in favour of plaintiff and against the. defendants jointly and severally alongwith future interest 18% per annum. The defendants are given six months time to deposit this amount. In the event of. defendants failure to deposit the decretal amount within this period, plaintiff shall be entitled to apply for final decree for sale of mortgage property bearing No. RZ-13 indira Park, out of khasra no. 641, village Nasirpur, Delhi. Decree sheet be prepared accordingly.