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2015 DIGILAW 319 (ORI)

Usharani Panda v. Subash Ch. Panda

2015-05-08

D.DASH

body2015
JUDGMENT 1. The unsuccessful plaintiff has preferred this appeal challenging the judgment and decree passed by the learned District Judge, Dhenkanal in R.F.A. No. 43 of 2008 confirming the judgment and decree passed by the learned Additional Civil Judge (Senior Division) Dhenkanal in C.S.No. 274 of 2006 dismissing the suit of the plaintiff. 2. The plaintiff's suit is for recovery of sum of Rs. 78,026/-.from the defendant no.1 (respondent no.1) together with the interest at the rate of 18% per annum with effect from the date of maturity of the sum invested in fixed deposit accounts lying with the defendant no.2 till payment. It is stated that the plaintiff's husband opened two fixed deposit accounts with the defendant no.2 in the name of the plaintiff each for sum of Rs.25,000/ - for a duration of five years and that money was given by the husband of the plaintiff from out of his retirement benefit which he received on superannuation of his service with Government. The accounts were opened on 10.12.2001 and its maturity date had been fixed to 10.12.2006 with the maturity value standing at Rs.39,013/- each totaling to Rs.Rs. 78,026/- for both. The plaintiffs husband after his retirement started doing trading business on iron rod, cement etc. and this defendant no.1 was looking after such business. The defendant no. 1 some time in October, 2002 persuaded the plaintiff to hand him those two fixed deposit receipts, so that he would keep the same in the Bank locker in safe custody. The plaintiff being an illiterate old lady acted upon the same. It is stated that at that time, the defendant no.1 though took some signatures from the plaintiff on some printed forms the same was not given much weightage. However, the plaintiff was surprised on receiving the letter from defendant no.2 on 19.12.2003 when she could come to know that this defendant no.1 by practicing fraud had pledged two fixed deposit receipts with the defendant no.2 showing to have been pledged by her and to have availed the loan of Rs.60,000/- making plaintiff as the guarantor. The plaintiff then asked the defendant no.1 about it when he agreed to refund the money. The assurance not being kept, the plaintiff's money in the fixed deposit accounts was adjusted by the bank towards the outstanding amount of loan standing in the name of defendant no.1. The plaintiff then asked the defendant no.1 about it when he agreed to refund the money. The assurance not being kept, the plaintiff's money in the fixed deposit accounts was adjusted by the bank towards the outstanding amount of loan standing in the name of defendant no.1. So, the present suit for recovery of the said sum adjusted in the loan account of the defendant no.2 on the basis of the so called authorization given by the plaintiff has been filed against the defendant no. 1. 3. The defendant no.1 however contested the suit. It is stated that he being an unemployed person and a distant relation of the plaintiff, a proposal was given by the plaintiff and her husband for managing their business. The defendant no.1 then agreed that they would be investing the money in equal proportion for the business and would be getting the profit proportionately shared. It is his further case that the husband of the plaintiff persuaded him to make loan application for extension of money for business development. Accordingly, the Bank authorities were consulted and they demanded for security deposit for grant of such loan in shape of a cash credit facility with the defendant no.2 up to a limit of the sum of Rs.60,000/-. It is stated that the amount from out of the loan account had been invested in the business. He at the same time denies involvement in the matter of practicing any fraud upon the plaintiff in getting those signatures on the printed forms with false assurance and getting those pledged and about misutilisation of those .in the way as afore stated. Defendant no.2, the Bank, has averred that the plaintiff out of free will and volition stood as the guarantor for defendant no.1 and had executed a memorandum of confirmation to pledge the fixed deposit receipts in favour of the Bank. The act was completely voluntary and the plaintiff had pledged the fixed deposits for the purpose of payment of the loan in case of non-payment by the principal borrower. They stated that notice was issued to the defendant no.1 and also the plaintiff intimating about non-payment and it is further stated that after the maturity of the fixed deposits with the value as that stood was adjusted towards the loan dues of defendant no.1. 4. On above rival pleadings, the trial court framed as many as eight issues. They stated that notice was issued to the defendant no.1 and also the plaintiff intimating about non-payment and it is further stated that after the maturity of the fixed deposits with the value as that stood was adjusted towards the loan dues of defendant no.1. 4. On above rival pleadings, the trial court framed as many as eight issues. Plaintiff examined herself as P.W.1 and placed reliance on the documents marked as Exts.1 to 4 which would come to be discussed as and when necessary. The defendant no.1 has not examined any witness nor has placed any documentary evidence in support of his stand. The trial court has taken up issue nos. 5, 6 and 7 together for decision and these are concerning controversy regarding pledging of plaintiffs two fixed deposit accounts; the plaintiff standing as security for the loan advanced by the defendant no.2 in favour of defendant no.1 and whether the fraud as alleged has been practiced upon the plaintiff. The trial court having gone to discuss the evidence has disbelieved the case of the plaintiff that her fixed deposits were pledged in the Bank without her knowledge and consent and it has next gone to hold that she had stood as guarantor for defendant no. 1 towards the said loan advanced by the defendant no.2. With these findings however the suit was dismissed on the grounds; (i] that without any cause of action the suit has been filed after three years and (ii) the suit is barred by limitation having been filed after the prescribed period as per Article 26 of the Limitation Act. 5. Learned District Judge being moved in appeal filed by the plaintiff being aggrieved by the findings of the trial court, on the factual aspects disbelieved the case of the plaintiff and held that no fraud has been practiced on her in showing her as guarantor for the defendant no.1 for the loan and in the matter of pledge of her fixed deposits for the purpose of that loan. Thereafter, instead of going to examine the correctness of the finding of the trial court in dismissing the suit for lack of cause of action and the finding, that the suit is barred by limitation being filed without adherence to Article 26 of the Limitation Act, the learned District Judge, has gone to dispose of the appeal and confirm the judgment and decree of the trial court on the following grounds :"As the plaintiff was a guarantor for defendant no.1 /borrower, she is bound to indemnify the defendant no.1 in case he fails to liquidate the loan amount and in that event, the defendant no.2 /Bank has got every liberty/right to recover such unpaid dues against the borrower from the guarantor” Next comes the view which has given fatal blow to the case of the plaintiff. "In view of the aforesaid circumstance, this Court comes to a conclusion that the plaintiff being a guarantor cannot make a money claim against the defendant no.1. This Court is of the considered opinion that the learned trial court did not commit any illegality or impropriety while dismissing the suit of the plaintiff.” 6. The appeal has been admitted on the following substantial questions of law: i) Whether the lower appellate court is correct in observing that a guarantor cannot make a money claim against the loanee (defendant no. 1)? ii) Whether the learned trial court is correct in its finding that the suit as against the defendant no.1 is barred by limitation? 7. Learned counsel for the appellant submits that both these questions on proper application of law covering the field ought to be answered in favour of the appellant as the courts below were not at all correct in dismissing the suit on these grounds. According to him, as provided under Section 140 of the Contract Act, the remedy of the surety guarantor always lies against the principal borrower towards recovery of the amount either paid or recovery from him towards discharge of the debt of the principal borrower paid in part or full. According to him, as provided under Section 140 of the Contract Act, the remedy of the surety guarantor always lies against the principal borrower towards recovery of the amount either paid or recovery from him towards discharge of the debt of the principal borrower paid in part or full. He contends that the courts below while holding the suit as liable to be dismissed on the above ground have not even winked at the provision of Section 140 of the Contract Act as also not given a careful reading to Article 26 of the Limitation Act, and being totally oblivious of the same in a most cavalier fashion have rendered the finding negating the right of the plaintiff and depriving her of her legal dues. He contends that in the case in hand absolutely no option was left to the. Courts below but to pass the decree as prayed for by the plaintiff. When the court below arrived at the conclusive findings that the plaintiff had stood as surety for the loan of defendant no.1 and had pledged her fixed deposits for the purpose, the plaintiff having availed his remedy as provided in law, she ought not to have been held as disentitled to the same. So, he urges that the judgment and decree of the court below are vulnerable. 8. Learned counsel for the respondent no.1 submits all in support of the findings of the courts below. He has reiterated the reasons given by the learned District Judge about non-maintainability of such suit at the instance of the plaintiff as she has no right to claim money paid in the loan account from her fixed deposit accounts and also that suit is hit by Article 26 of the Limitation Act. 9. In order to address the rival submission, it is felt apposite to straight way have a glimpse of the provision of Section 140 of the Contract Act which reads as under:- "140. Rights of surety on payment of 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 is liable for, is invested with all the rights which the creditor had against the principal-debtor. The section lays down a general principle, of which the most practical application is found in Section 141. The section lays down a general principle, of which the most practical application is found in Section 141. As soon as the guarantor has paid to the creditor, what is due to the creditor under the guarantee, he is entitled, unless he has waived them to be subrogated to all the rights possessed by the creditor in respect of the debt, default or miscarriage to which the guarantee relates. The provision enables to keep alive for the surety's benefit any right of the creditor, under a security or otherwise, which would otherwise have been extinguished at law by the payment of the debt or performance of duty. 10. The position of law as regards the right of subrogation may be further exposited as under: The whole doctrine of principal and surety, with all its consequences of contribution, etc. rests upon the established principles of a court of equity, not upon contract, except as it may be so represented upon the implied knowledge of those principles. There is no express contract for contribution, the bonds generally, if not universally, being joint and several, creating several obligations by each.... (The general reason of the equitable doctrines is) that a surety is to 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 upon contract, but upon a principle of natural justice. A surety paying off the debt is entitled to all the rights and securities of the creditor as against the principal-debtor. The surety's right to the creditor's securities on payment of the guaranteed debt arises from the obligation, imposed on the principal-debtor, of indemnifying the surety, which makes it inequitable for a creditor, by electing not to avail himself of the securities for the guaranteed debt, to throw the whole liability on to the guarantor." 11. Subrogation is automatic. The surety's right to the creditor's securities on payment of the guaranteed debt arises from the obligation, imposed on the principal-debtor, of indemnifying the surety, which makes it inequitable for a creditor, by electing not to avail himself of the securities for the guaranteed debt, to throw the whole liability on to the guarantor." 11. Subrogation is automatic. After the debt is due, or the default occurs in the performance of the promise which has been guaranteed, and the surety has paid the surety or performed his liability under the guarantee, the surety can sue the principal-debtor in his own name. At this stage, it is also to be noted that the right of the surety against the creditor accrued to him from the relationship created by the guarantee, and arises at the time of his becoming guarantor and not merely when he discharges the principal-debtor's obligation to the surety, and therefore, it is not at all the law that the guarantor has no rights until he pays the guaranteed debt. 12. The position of law being above, it is thus seen that the view taken by the learned District Judge as stated in above para 5 has absolutely no legal sanction and rather wholly contrary to the statutory provisions holding the field and in violation of the doctrine upon which those are founded upon and as such are liable to be set-aside. 13. For the aforesaid having found the vulnerability of the lower appellate court's decision, it would be proper to go to examine the defensibility of the decision of the trial court so far as the limitation for the suit is concerned and that being barred by limitation as held. For this the trial court has banked upon the provision of Article 26 of the Limitation Act. But interestingly, it is seen that Article 26 does not relate to such type of suit in specific. It refers to the suit for money payable to the plaintiff for money from out of the defendant to the plaintiff on accounts stated between them. The trial court has taken that Article to be appropriate one for guiding the suit of this nature when this is a suit filed by the surety against the principal-debtor. For the purpose Article 42 is the appropriate one. The trial court has taken that Article to be appropriate one for guiding the suit of this nature when this is a suit filed by the surety against the principal-debtor. For the purpose Article 42 is the appropriate one. The period of limitation is three years and the time is to begin when surety paid to the creditor. So here a question arises, if it is assumed that the view of the learned District Judge is correct or the theory found by him is acceptable, then this Article 42 of the Limitation Act appears to have either been struck down for which there remains .no power with him or it has to be taken to have been repealed which is not the fact. Even as per that Article which has been selected by the learned Civil Judge (Senior Division), the present suit is not going to be barred by limitation, the cause of action having arisen after payment of money to the creditor on account of default of the principal debtor. In the present case, default information was given on 19.12.2003 and the notice was given by the Bank to the plaintiff and the defendant through the lawyer on 21.04.2004 requesting them to clear up the same. So certainly thereafter action was taken with regard to the adjustment of the sum under pledged fixed deposits of the plaintiff. Thus computing from that date, the suit having been filed in the year 2006, the same can under no circumstance be held to be barred by limitation. For the aforesaid discussion and reason, the substantial questions of law are answered in favour of the plaintiff-appellant and in view of the same, it is to hold that the courts below have erred in law by dismissing the suit of the plaintiff which was not permissible on the face of the findings on the factual aspects rendered by both the courts. 16. In the wake of aforesaid, appeal stands allowed, the judgments and decrees passed by the courts below are set aside. The suit of the plaintiff is decreed with cost throughout.