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2012 DIGILAW 90 (JK)

Citizen Co-operative Bank Ltd. v. Suteesh Kumar

2012-03-05

Sanjay Gupta

body2012
1. Petitioner Bank has filed present present revision petition, against the order of respondent no. 4. dt. 11.4.2009, by virtue of which it has been held while passing award that, petitioner Bank shall initially proceed against the respondent no. 1 for recovery of amount and respondents 2 and 3 shall be liable to pay the amount, which respondent no. 1 would fails to pay. 2. Petitioner has challenged the impugned on the grounds that, Court below has failed to appreciate the letter of guarantees executed by respondent no. 2 and 3, where it has been mentioned that these respondents are jointly and severely liable to pay the loan amount along with respondent no. 1. That Order impugned is illegal and against the expressed contract executed between the bank and respondents no. 1, 2 and 3. 3. After filing of this revision petition respondent No. 1,2,and 3 have not appeared despite issuance of registered notice. Thereafter even substituted service was affected in State Times publication on 7th Feb., 2012. Respondent no. 1 and 3, despite publication have not appeared, accordingly they have been set ex-party. 4. I have heard counsel for the petitioner and counsel for respondent no. 4. 5. Record reveals that, respondent no. 1 obtained loan of Rs. 4.00 lac from petitioner Bank from its Branch Office Ware House Jammu on 27.1.2003 for purchase Tempo Traveler. All the necessary documents were executed and Respondent No. 2 and 3 being members, stood as guarantors. Thereafter principal borrower became defaulter and did not repay the loan amount and accordingly a arbitration petition was filed before Jt. Registrar Special Cooperative Societies, Jammu u/s 72 of J&K Cooperative Society Act, 1989 for passing an award to the tune of Rs. 4,62,106/- calculated up to 30.4.2007 plus future interest @ 13%, with effect from Ist May, 2007, till its realization. Petition was transferred to Additional Registrar and thereafter tried by Registrar. 6. Respondent No. 1 -3 did not appear before court below, despite issuing of registered notice and so Court below passed the award on 11.4.2009. Concluding of Para of award reads as under: "An award for an amount of Rs. 462106/- is passed in favour of the petitioner. Bank besides the interest from 1.5.2007 as per the prevailing rate of interest. The bank is at liberty to proceed against the respondent No. 1 the principal debtor for the recovery of the amount. Concluding of Para of award reads as under: "An award for an amount of Rs. 462106/- is passed in favour of the petitioner. Bank besides the interest from 1.5.2007 as per the prevailing rate of interest. The bank is at liberty to proceed against the respondent No. 1 the principal debtor for the recovery of the amount. The respondent no. 2 and 3 shall be liable to pay the balance amount if any which the Principal Debtor fails to pay." 7. Counsel for petitioner has argued that award passed by court below is not according to term of law governing to contract of guarantee. 8. I have given my thought consideration to whole aspects of matter. 9. Contract of Guarantee means to perform the promise or discharge the liabilities of third person in case of default. Principle debtor/ borrower is a person in whose favour guarantee is given and creditor are those person to whom guarantee is given. The liability of surety/guarantor is co-extensive with that of principle debtor and thus principle debtor/borrower and guarantor are jointly and severely liable to creditor. 10. Chapter VIII of contract act deals with indemnity and guarantee. 11. Section 128 of contract act reads as under. Section 128 -- Surety Liability: The liability of the surety is co-extensive with that of the principal debtor, unless it is otherwise provided by contract. So as per section 128 of Contract Act, liability of surety /guarantor is co-extensive with that of principle debtor. 12. In the present case, direction of court below, that bank shall recover the decreed amount from respondent no. 1 at first instance and in the event of his failure, the guarantors shall be subject to pay the amount, which respondent no 1 fails to pay, is thus not according to law as per contract of guarantee. 13. It has become a trend nowadays for dishonest and trickster person, to avail lone from bank or financial institution, with very intention not to repay it. If it is not curbed, than banks or financial institutions will be ruined and public money will be swallowed. 14. Accordingly, this revision petition is allowed and impugned order is modified to the extent that respondents I to 3 shall jointly and severely liable to pay the award. Already much time has expired, so Bank shall take coercive steps in recovering the amount. 14. Accordingly, this revision petition is allowed and impugned order is modified to the extent that respondents I to 3 shall jointly and severely liable to pay the award. Already much time has expired, so Bank shall take coercive steps in recovering the amount. File of court below is sent back along with order. Present file be consigned to record.