At, Debt Recovery Appellate Tribunal At Chennai
By, THE HONORABLE JUSTICE: A. SUBBULAKSHMY. (CHAIRMAN)
1. Aggrieved against the order passed by the Presiding Officer, Debt Recovery Tribunal (DRT), Chennai, in TA-101/1997 against the appellant (defendant No. 3 in the OA) for recovery of a sum of Rs. 90,055.74p with 12% simple interest from the date of plaint till the date of realisaction, the appellant has preferred this appeal.
2. The appellant in this appeal contends that the Tribunal erred in holding that the appellant is not entitled to hold back the amount due under the bills and the Tribunal erred in holding that a sum of Rs. 90,055.74 p, was due and payable by the appellant to the 1st respondent Canara Bank with simple interest at the rate of 12% and the Tribunal also erred in observing that the 1st respondent Bank restricted its claim upto four payments i.e. dated 21.7.1987 for Rs. 1,037.74p, bill dated 17.9.1987 for Rs.1,838/-, bill dated 17.10.1987 for Rs. 11,902/- and bill dated 19.10.1987 for Rs. 75,278/-, and
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the appellant has also sustained loss because the 2nd respondent did not supply the goods under the bill purchase orders and the Tribunal failed to consider the conditions of the contract and also the Indian Railway Standard Conditions for contract under which the 2nd respondent agreed to supply the goods.3. The Original Application (OA) was filed before the DRT for recovery of Rs. 12,00,553.16 p. against the defendants in the OA and out of this Rs. 3,10,046.63 p. against the 3rd defendant (appellant) with future interest @ 15.5.% p.a. on Rs. 8,903.50p. under term loan, and 17.5% on Rs. 3,45,146.63 p, towards Supply Bills Discounting facility and 17.5% on Rs. 8,46,503.03 p. towards cash credit account with costs and for sale of the plaint schedule properties. At the requests of defendants 1 and 2, the Bank granted a loan of Rs. 75,000/- for purchase of machinery on 11.12.1984 and the defendants 1 and 2 also executed articles of agreement and deed of hypothecation in respect of 'B' schedule property. The Bank also granted a limit of Rs. 5 lakhs for discounting of supply bills on 19.5.1986 for which demand promissory note was executed on that date. Subsequently, the limit was enhanced to Rs. 6 lakhs on executing a promissory note on 7.4.1984. On 22.7.1986, the Bank granted Rs: 2 lakhs for Open Cash Credit for which also necessary documents, promissory note, equitable mortgage deeds, etc. were executed on 10.11.1984. The 1st defendant also executed a Power of Attorney on 29.9.1984 in favour of the Bank authorising the Bank inter alia to demand and receive and give effectual receipts for the discharge of the money covered by the bills discounted by the 1st defendant to the plaintiff in respect of the goods supplied to 3rd defendant. The Power of Attorney executed by the 1st defendant in favour of the Bank was registered in the name of the 3rd defendant and the 3rd defendant has acknowledged that. The 3rd defendant paid the amount due under certain bills raised by the 1st defendant against the 3rd defendant and discounted with the plaintiff Bank. The 3rd defendant did not pay the amount mentioned in the annexure filed with the plaint aggregating to Rs. 3,10,046.63 p. The defendants 1 and 2 remained ex parte. The 3rd defendant present appellant alone was the contesting party in the OA. The 3rd defendant admits that the 1st defendant executed a Power of Attorney empowering the Bank to receive any payment that may be due and payable to the 1st defendant and it has been accepted by the 3rd defendant. The 3rd defendant-appellant contends that at the time of acceptance, the 3rd defendant informed the plaintiff Bank that only when the 1st defendant's bills are received duly stamped by the Bank concerned, the payments towards the bill would be made by the defendant to the applicant Bank, otherwise, this defendant-appellant is in no way liable to pay any amount to the Bank and as on date only a sum of Rs. 1,60,101 /- is due and payable by the 1st defendant to this defendant-appellant towards the Risk Purchase Cost and no amounts are outstanding due and payable by the 3rd defendant-appellant to the 1st defendant.4. The DRT passed the decree declaring that the applicant Bank is entitled to a Recovery Certificate for a sum of Rs. 11,10,497.42p. against the defendants 1 and 2 and a Recovery Certificate for a sum of Rs. 90,055.74 p. against the 3rd defendant with 12% simple interest from the date of plaint till the date of realisation, and other reliefs.5. The appellant 3rd defendant is aggrieved against the order passed by the DRT in issuing the Recovery Certificate for Rs.90,055.74p against him. The learned Counsel for the appellant 3rd defendant submitted that the appellant is not liable to make payment in respect of defective goods supplied by the 3rd defendant under the purchase order and as the goods sent were defective the 3rd defendant withheld that amount and is not liable to pay the amount. In the proof affidavit filed by the 3rd defendant-appellant, it is stated that four payments for a sum of Rs. 1,037.74 p, Rs. 1,838/-, Rs. 11,902/- and 75,278/- has been kept under deposit since the supplies by the 1st defendant were not in accordance with the required specifications and except this, all the amounts had already been paid. The Statement Ex. A.23 showing the particulars of payment made by the 3rd defendant reveals that a sum of Rs. 90,055.74 p has been kept under deposit by the appellant as the supplier, the 1st defendant had failed to fulfil the contractual obligations. Counsel for the appellant submits that the goods supplied under the four bills are not according to the specifications and so the appellant is entitled to withhold that amount.6. Counsel appearing for the respondent Bank submitted that the execution of Power of Attorney amounts to equitable assignment of the debt namely, the amounts covered by the bill and the appellant is aware of the assignment of debt by the 1st defendant to the Bank and the appellant also gave a letter of undertaking acknowledging the receipt of Power of Attorney to make the bill payments directly to the Bank under Ex. A. 13 and, therefore, the amounts withheld by the appellant on the supply of bills should be paid to the respondent Bank. He relies upon the decision of the Supreme Court reported in : AIR 1969 SC 313 wherein the Apex Court has held that the power of attorney coupled with the endorsement on the bill was a clear engagement by M to pay the appellant-Bank out of the moneys receivable under the bill and amounted to an equitable assignment of the fund by way of security. The obvious intention of the parties was to provide protection for the lender and to secure repayment of the loans. With that object in view the lender was authorised to receive payment of the loans. As the lender had an interest in the funds the Power of Attorney was expressed to be irrevocable.There can be a valid equitable assignment of future debts. A pay order is revocable mandate. It gives the payee no interest in the fund. An assignment creates an interest in the fund and is not revocable. Read in the light of the Power of Attorney the endorsement on the bill created an interest in a specific fund and was irrevocable. There was thus a sufficient equitable assignment of a specific fund in favour of the appellant-Bank.7. The Power of Attorney amounts to a binding equitable assignment which is an actionable claim. In the case on hand, the 2nd respondent executed a Power of Attorney in favour of the 1st defendant Bank authorising the Bank to receive all the money due or payable by the appellant and supply of others. The 3rd defendant has also accepted this. It is also an admitted fact that goods were supplied by the 2nd defendant respondent to the appellant and the goods have been received. The appellant has also made several payments to the Bank in respect of the supplies effected by the 1st defendant. The Counsel for appellant contends that only because the goods supplied by the 2nd respondent was not upto the specification he withheld the four payments. As rightly observed by the DRT, the standard conditions relied on by the defendant will be binding only between the contractual parties i.e. between the supplier, the 2nd respondent and the appellant and when once the 1st respondent Bank agreed to discount the bills on the Power of Attorney executed by the 2nd respondent in favour of the 1st respondent Bank and in view of the letter of undertaking given by the appellant under Ex. A. 13, the entire bill amount discounted by the 2nd respondent for the supply effected by the 2nd respondent to the appellant shall be paid by the appellant to the 1st respondent Bank. The 1st respondent Bank had discounted bills based on supply bills and delivered a challan sent by the appellant for having received the goods. The appellant is not entitled to withhold the amount covered under the four bills for a sum of Rs. 90,055.74p, There is valid equitable assignment by execution of Power of Attorney in favour of the 1st respondent Bank authorising the Bank to receive all the money due and payable by the appellant on the supply of bills. The same thing has been accepted by the appellant also. The DRT has rightly issued Recovery Certificate for a sum of Rs. 90,055.74 p against the appellant with proportionate costs.8. I find no infirmity in the Order passed by the PO, DRT. The appeal fails and is dismissed. No costs.