1995 (10) TMI 244 - HC - Indian Laws

Summary

Issues Involved:
1. Legality and validity of the judgment and decree.
2. Competency and time-barred nature of the suit.
3. Acknowledgment of debt and limitation period.
4. Authority of the partner to acknowledge debt.
5. Right of the bank to liquidate fixed deposit receipts.
6. Proof of suit dues and entitlement to interest.
7. Rate of interest charged by the bank.

Detailed Analysis:

1. Legality and Validity of the Judgment and Decree:
The appellants challenged the judgment and decree of the City Civil Court, Ahmedabad, which decreed the suit of the respondent bank for a sum of Rs. 5,66,368/- with interest at 18% per annum on Rs. 3,76,000/- from the date of the suit till realization. The High Court found no illegality in the judgment and decree, deeming them "weighty, legal and sustainable."

2. Competency and Time-Barred Nature of the Suit:
The appellants argued that the suit was incompetent and time-barred. The High Court noted that the suit was filed within the three-year limitation period prescribed under Article 1 of the Limitation Act, 1963, for suits relating to accounts. The last entry in the account was on 21st October 1980, and the suit was filed on 17th February 1984, within the permissible period.

3. Acknowledgment of Debt and Limitation Period:
The suit was founded on acknowledgments made by the defendants. The bank produced three written acknowledgments at Exhs. 74, 75, and 103, confirming the dues. The High Court upheld these acknowledgments under Section 18 of the Limitation Act, which extends the limitation period upon acknowledgment of liability in writing.

4. Authority of the Partner to Acknowledge Debt:
The appellants contended that the acknowledgments made by one partner, Mr. D.K. Patel, were not binding on the firm and other partners. The High Court rejected this argument, citing Section 18 of the Indian Partnership Act, 1932, which states that a partner is an agent of the firm for business purposes. The court also referenced a Division Bench decision affirming that a partner's acknowledgment of liability binds the firm.

5. Right of the Bank to Liquidate Fixed Deposit Receipts:
The appellants questioned the bank's authority to liquidate fixed deposit receipts for appropriation towards dues. The High Court upheld the bank's action, citing the banker's general lien under Section 171 of the Indian Contract Act, 1872, and the doctrine of "set-off." The court found the bank's action justified, legal, and not arbitrary.

6. Proof of Suit Dues and Entitlement to Interest:
The High Court found that the bank had successfully established the suit dues through certified copies of bank entries and oral evidence from bank witnesses. The court dismissed the appellants' argument that the bank had failed to prove its dues.

7. Rate of Interest Charged by the Bank:
The appellants argued that the bank was not entitled to the interest rate awarded. The High Court found that the interest rate was contractual and in line with the Reserve Bank of India's directions. The court referenced Sections 21 and 35-A of the Banking Regulation Act, 1949, and concluded that the interest rate was just, reasonable, and legal.

Conclusion:
The High Court dismissed the appeal, affirming the trial court's judgment and decree. The court found no merit in the appellants' arguments and upheld the bank's actions as legal and justified. The appeal was dismissed with full costs, and the court noted that the judgment should not hinder any departmental action against erring bank officers.