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2013 DIGILAW 1876 (ALL)

Nand Kishore Agarwal v. State of U. P. and Others

2013-07-18

SATISH CHANDRA, SIBGHAT ULLAH KHAN

body2013
S.U. Khan, J.— In this case on 10.07.2013 following order was passed: "Heard Sri Hari Om Singh, learned counsel for the appellant and Sri H.P.Srivastava, learned Additional Chief Standing Counsel. Sri H.P.Srivastava, learned Additional Chief Standing Counsel on the suggestion of the Court has agreed for final disposal of the appeal at the admission stage without any counter-affidavit or without record of the court below as pure question of law is involved in the matter. Judgment reserved." This F.A.F.O. is directed against order dated 02.05.2013 passed by Civil Judge (S.D.), Lakhimpur Khiri rejecting plaintiff-appellant's temporary injunction application in Regular Suit No.223 of 2013, Nand Kishore Agarwal Vs. State of U.P. According to the plaint allegations, M/s Sanjay Industries, Baharaich Road, Lakhimpur Khiri and its partners took a loan from Union Bank of India after mortgaging their property for which the plaintiff-appellant and two others were sureties guarantors, the firm and its partners defaulted in payment of loan and recovery proceedings were initiated by the bank against the plaintiff guarantor also hence out of the due amount of about Rs.57/- lacs, plaintiff paid Rs.31 lacs and the remaining amount of the loan was paid by Prem Kumar the borrower by selling part of the mortgaged property. In view of this it was claimed that plaintiff became mortgagee of the mortgaged property at the place of the bank and the firm and its partners became plaintiff's mortgagors (Mortgaged property consisted of half part of agricultural plot No.173, area 0.86 acres situate in village Mahari Nagar and two other non agricultural plots). It was further claimed that on the said property, Union Bank of India was having first charge hence after paying part of the loan to the bank as guarantor plaintiff acquired first charge over the property in dispute. Afterwards the firm and its partners had also taken loan from District Industry Officer, Lakhimpur, District Khiri after mortgaging the same property hence District Industries Officer, Lakhimpur Khiri had second charge over the property after the first charge of the bank over the said property. Defendant No.4, District Industries Officer sent recovery certificate to Collector, Lakhimpur Khiri for realising its dues. Tehsil Authorities, Lakhimpur Khiri fixed a date for auction of mortgaged property consisting of plot No.173. Defendant No.4, District Industries Officer sent recovery certificate to Collector, Lakhimpur Khiri for realising its dues. Tehsil Authorities, Lakhimpur Khiri fixed a date for auction of mortgaged property consisting of plot No.173. Plaintiff claimed that he requested Collector and other Tehsil Authorities not to auction the property as he had the first charge however they did not pay any heed. In the written statement, it was stated that apart from the loan of defendant No.4, there were other arrears also on the firm and its partners like trade tax (about Rs.8.68 lacs) and dues of Mandi Samiti (about Rs.2.09 lacs). It was stated that total dues were Rs.21,22,410/-. It appears that initially whole plot No.173 was mortgaged however afterward half of the plot was sold by the borrowers after permission from the bank and part of dues were in this manner cleared by them and only half portion of the said plot was marked that defendant No.4 had second charge. Plaintiff had also filed Civil Suit No.604 of 2010 against the borrower, firm and its partners for permanent prohibitory injunction and for recovery of the amount from the borrower, which the plaintiff had paid to the bank as guarantor of the firm. The court below held that prior to becoming guarantor plaintiff had no share or interest in the property and that plaintiff was only one of the three guarantors hence he did not have a right of redemption under Section 92 of Transfer of Property Act. It was held that neither suit was maintainable for challenging the auction nor temporary injunction could be granted without furnishing security. Reference was made to Daya Shanker Vs. A.D.J., 2006 (1) AWC 476 . Learned counsel for appellant apart from placing reliance upon Section 91 and 92, T.P. Act has also placed reliance upon Section 140, Contract Act, which is quoted below: "140. Rights of surety on payment or performance. Where a guaranteed debt has become due, or default of the principal debtor to perform a guaranteed duty has taken place, the surety, upon payment or performance of all that he is liable for, is invested with all the rights which the creditor had against the principal debtor." Under the aforesaid section, plaintiff is invested with all the rights of the bank against the firm and its partners. The argument of learned Additional Chief Standing Counsel that after making payment to the bank plaintiff appellant stepped into the shoes of the firm and its partners and not into the shoes of bank cannot be accepted. In this regard, reference may be made to Amrit Lal Goverdhan Lalan vs State Bank Of Travancore & Ors, AIR 1968 SC 1432 . In the middle of para-7 of the said authority after quoting Section 140, Contract Act it was held as follows: "This section embodies the general rule of equity expounded by Sir Samuel Romilly as counsel and accepted by the Court of Chancery in Craythorne v. Swinburne, namely : "The surety will be entitled to every remedy which the creditor has against the principal debtor; to enforce every security and all means of payment; to stand in the place of the creditor; not only through the medium of contract, but even by means of securities entered into without the knowledge of the surety; having a right to have those securities transferred to him, though there was no stipulation for that; and to avail himself of all those securities against the debtor. This right of a surety also stands, not upon contract, but upon a principle of natural justice." The language of the section which employs the words "is invested with all the rights which the creditor had against the principal debtor" makes it plain that even without the necessity of a transfer, the law vests those rights in the surety." Similarly in Bank of Bihar Vs. Damodar Prasad, AIR 1969 SC 297 it was held that surety on payment of amount to the creditor subrogates to the rights of the creditor under Section 140, Contract Act. Part payment may not be sufficient to invoke Section 140, however after payment of rest of the amount by three debtors, the payment of Rs.31/- lacs, which was made by the plaintiff appellant, the guarantor and which was part payment at that time became full payment. Learned Additional C.S.C. has himself cited the authority of Amrit Lal Gobardhan. He has also cited the authority reported in V. Saraswathi and another Vs. E. Thevi and others, 1993 Supp (2) SCC 201. Learned Additional C.S.C. has himself cited the authority of Amrit Lal Gobardhan. He has also cited the authority reported in V. Saraswathi and another Vs. E. Thevi and others, 1993 Supp (2) SCC 201. That was a case under Sections 60, 92 and other sections of T.P. Act and it was held that co-mortgagor by redeeming the mortgaged property does not step into the shoes of mortgagee as on redemption mortgage comes to an end. In the instant case, it is not a case of redemption of mortgage. The other authority which has been cited by learned Additional C.S.C. is reported in K.G. Achari Vs. V.P. Achari, 1996 (7) SCC 720 . In the said case, mortgage debt was paid by stranger voluntarily and thereafter he obtained deed of release from mortgagee. In that scenario, it was held that he could not claim right of mortgagee. The next authority cited is reported in K.P.R. Nair Vs. P. Pillai and others, 2004 (12) SCC 754 dealing with partition of mortgaged property jointly owned. In the said authority, it was held that property subject to mortgage is available as between co-owners and co-mortgagors for partition subject to adjustment of the burden on the property. The position is also squarely covered by Sections 91 and 92 of T.P. Act, which are quoted below: "91. Persons who may sue for redemption.-Besides the mortgagor, any of the following persons may redeem, or institute a suit for redemption of, the mortgaged property, namely:-- (a) any person (other than the mortgagee of the interest sought to be redeemed) who has any interest in, or charge upon, the property mortgaged or in or upon the right to redeem the same; (b) any surety for the payment of the mortgage-debt or any part thereof; or (c) any creditor of the mortgagor who has in a suit for the administration of his estate obtained a decree for sale of the mortgaged property. 92. Subrogation.- Any of the persons referred to in section 91 (other than the mortgagor) and any co-mortgagor shall, on redeeming property subject to the mortgage, have, so far as regards redemption, foreclosure or sale of such property, the same rights as the mortgagee whose mortgage he redeems may have against the mortgagor or any other mortgagee. 92. Subrogation.- Any of the persons referred to in section 91 (other than the mortgagor) and any co-mortgagor shall, on redeeming property subject to the mortgage, have, so far as regards redemption, foreclosure or sale of such property, the same rights as the mortgagee whose mortgage he redeems may have against the mortgagor or any other mortgagee. The right conferred by this section is called the right of subrogation, and a person acquiring the same is said to be subrogated to the rights of the mortgagee whose mortgage he redeems. A person who has advanced to a mortgagor money with which the mortgage has been redeemed shall be subrogated to the rights of the mortgagee whose mortgage has been redeemed, if the mortgagor has by a registered instrument agreed that such persons shall be so subrogated. Nothing in this section shall be deemed to confer a right of subrogation on any person unless the mortgage in respect of which the right is claimed has been redeemed in full." However, as plaintiff appellant has only first charge over the property, hence he cannot restrain the other creditors from enforcing the second and third charges. The only thing is that he can claim priority in payment out of sale proceeds. Accordingly, even though it is held that the reason given by the court below for rejecting the temporary injunction application of the plaintiff is not correct and the findings in that regard are set aside, however plaintiff is not entitled to seek stay of the auction. He can only apply for payment of his dues on priority basis out of the sale proceeds. Accordingly, plaintiff is entitled to file fresh temporary injunction application in the light of the observations made above. F.A.F.O. is accordingly disposed of. _____________