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2018 DIGILAW 1423 (JHR)

State Bank of India v. State of Jharkhand

2018-07-04

ANUBHA RAWAT CHOUDHARY

body2018
JUDGMENT : Heard Mr. Rajesh Kumar, counsel appearing for the petitioner. 2. Nobody appears on behalf of the respondent no.1. 3. So far as respondent no. 2 is concerned, he has entered appearance through Advocate by filing Vakalatnama but nobody is appearing on behalf of the respondent no. 2. It further appears from the record that no counter-affidavit has also been filed by the respondents. 4. This writ petition has been filed for the following reliefs : “(a) For quashing the purported order dated 26.02.2002 (Annexure-14) whereby and whereunder the respondent No. 1 has arbitrarily, illegally and in wrong exercise of jurisdiction exonerated the respondent No. 2 from his liability for repayment of the loan of the petitioner-bank by ignoring or disregarding the admitted factum that the said respondent No. 2 was a guarantor in his individual capacity apart from being a director of the borrower company by the name of M/s Red ball Express Carriers Private Limited. (b) For issuance of an appropriate writ or order or direction for the Certificate Officer, Hazaribagh to proceed against all the certificate debtors in pursuance of the Certificate Case No. 37/86-87 for realization of the petitioner bank’s dues from all the certificate debtors including the respondent No. 2; (c) For issuance of any other appropriate writ or order or direction for doing conscionable justice to the petitioner bank.” 5. Counsel for the petitioner submits as under : (a) That in the year, 1981 a company namely, M/s Red Ball Express Carriers Private Limited had taken term loan of Rs. 2.89 Lakhs for the purpose of carrying on transport business of the company and the petitioner-Bank had extended the loan to the said company as per the terms and conditions of the loan agreement in which the respondent no. 2, being the Director of the company, had also given a personal guarantee in individual capacity. A copy of the personal guarantee dated 29.06.1981 is annexed as Annexure-2 to this writ petition. A further agreement was signed by the respondent no. 2 so as to enable the petitioner-Bank to recover the said loan by way of public demand under the provisions of Bihar and Orissa Public Demand Recovery Act, 1914. (b) He further submits that the account of the company was declared a non-performing asset and for a realization of outstanding amount of Rs. 2 so as to enable the petitioner-Bank to recover the said loan by way of public demand under the provisions of Bihar and Orissa Public Demand Recovery Act, 1914. (b) He further submits that the account of the company was declared a non-performing asset and for a realization of outstanding amount of Rs. 6,74,365.86 as on 02.02.1987, the petitioner-Bank filed a certificate case against the borrower as well as the guarantors which was numbered as Certificate Case No. 37 of 1986-87. (c) In the said certificate case, notices were issued to the parties and the respondent no. 2, after being noticed, appeared and filed his objection under Section 9 of Bihar and Orissa Public Demand Recovery Act, 1914 denying his liability. The respondent no. 2 had also taken the point that the certificate case itself is time-barred. He also relied upon the compromise entered into between and amongst the company and its Directors in proceeding under Section 397 of the Companies Act and as per the said compromise, the respondent no. 2 was not liable to pay the demand of the Bank. (d) The said objection filed by the respondent no. 2 was dismissed by the Certificate Officer vide order dated 30.06.1992 as contained in Annexure-7 to the writ petition. By dismissing the objection filed by the respondent no. 2, the Certificate Officer considered the revival letter dated 19.06.1984 duly signed by authorized manager of the company and other documents to show that the certificate case filed by the petitioner-Bank was not barred by limitation. (e) Counsel for the petitioner further submits that the borrower as well as the guarantor are jointly and severally liable to clear the dues of the bank and further from the impugned order it appears that the plea of the limitation was rejected by a reasoned order after considering the materials on record. Further, the plea of the respondent no. 2 that he is exonerated from his personal liability by virtue of certain compromise entered into amongst the borrowers and guarantors in a company petition which was filed before the Hon’ble Delhi High Court which ended by way of compromise, was also rejected. (f) Counsel for the petitioner submits that the order dated 30.06.1992 was rightly passed by the Certificate Officer considering the materials on record and also considering the fact that the respondent no. (f) Counsel for the petitioner submits that the order dated 30.06.1992 was rightly passed by the Certificate Officer considering the materials on record and also considering the fact that the respondent no. 2 had given his guarantee in his personal capacity and merely because some compromise has been entered into in a company petition before Delhi High Court amongst the company and its directors, the same will not exonerate the respondent no. 2 from his liability so far as repayment of loan is concerned. (g) However, thereafter the respondent no. 2 filed a review petitioner under Section 63 of Bihar and Orissa Public Demand Recovery Act, 1914 re-agitating his point and the review application was entertained by the District Certificate Officer, Hazaribag in spite of specific objection raised by the writ petitioner and was decided in favour of the respondent no. 2 vide order dated 26.06.1995. (h) Counsel for the petitioners submits that while deciding the review petition, the District Certificate Officer totally ignored the documents which were referred to in order dated 30.06.1992 and held that the claim of the Bank was barred by limitation and thereafter held that the respondent no. 2 was exonerated from his liabilities by the letter issued by one directors of the company and pursuant to this, the review petition was allowed and the Certificate Proceeding against respondent no. 2 was dropped. (i) Against the order of review, the writ petitioner filed appeal before the appellate authority and the appellate authority numbered the case as Certificate Appeal No. 18 of 1995 which was decided vide order dated 27.05.1997. The appellate authority again considered the materials on record and allowed the appeal in favour of the petitioner-Bank vide order dated 27.05.1997. (j) Against the order passed by the appellate authority, a revision was filed by the respondent no. 2 herein, which was decided by the impugned order dated 26.02.2002 in Hazaribagh Certificate Revision No. 64 of 1997 in favour of the respondent no 2. (k) Counsel for the petitioner while assailing the aforesaid order passed by the revisional authority submits that the said authority has again ignored the various documents filed by the Bank and recorded by the Certificate Officer while passing the order dated 30.06.1992. He submits that the revisional authority decided the case in favour of the respondent no. 2 by holding that the respondent no. He submits that the revisional authority decided the case in favour of the respondent no. 2 by holding that the respondent no. 2 was simply employee of the company and had nothing to do with the assets and liabilities of the company. The revisional authority has failed to consider that the respondent no. 2 had executed a personal guarantee in connection with the loan and had also executed the agreement that the loan be recovered from him as a public demand. He further submits that the revisional authority also held that the Bank should make endeavor to find out the whereabouts of the company and hypothecated property as well as the other Directors of the company and realize the dues from them. (l) Counsel for the petitioner also submits that the liability of the guarantor and borrower is co-extensive and the impugned order suffers from patent illegality. He submits that whatever be the status of the respondent no. 2 so far as the company is concerned, he cannot escape from his personal liability as a guarantor and the certificate case was filed within a period of limitation as the letter of revival was signed on 19.06.1984 and the certificate case was instituted on 02.02.1987 i.e. within three years from 19.06.1984. (m) Counsel for the petitioner has relied upon the judgment reported in AIR 1969 SC 297 (paragraph nos. 4 and 5) and also the judgment reported in (1992) 3 SCC 159 . 6. After hearing the counsel for the petitioner and after going through the materials on record, this Court finds that admittedly the respondent no. 2 stood as a guarantor in connection with loan advanced to the company and also entered into an agreement with the Bank for realization of the dues by way of public demand. 7. Some of the important clauses of the personal guarantee given by the respondent no. 2 are clauses 2, 5 and 6 which are quoted hereinbelow for ready reference :- “2. We/I the undersigned, (1) Col (Retd.) B.S. Chimni (2) Lt. Col (Retd.) S. Kapur (Guarantor) hereby guarantee to the said Bank the payment on demand of all moneys at any time and from time to time hereinafter due to the said Bank by the Borrower in respect of the said accommodation with interest thereon at the rate of Rs. We/I the undersigned, (1) Col (Retd.) B.S. Chimni (2) Lt. Col (Retd.) S. Kapur (Guarantor) hereby guarantee to the said Bank the payment on demand of all moneys at any time and from time to time hereinafter due to the said Bank by the Borrower in respect of the said accommodation with interest thereon at the rate of Rs. 15% per cent per annum from the date of demand and the due performance and observance by the Borrower of all the Terms pertaining to the accommodation aforesaid and the payment of all costs and expense incurred by the said Bank in relation to the premises and we/I also agree to pay and make good to the said Bank on demand all losses, cost damages and expenses occasioned to the said Bank by reason of the non-payment of the said moneys costs and expenses or any pay thereof or the branch, non-performance or non-observance of any of the terms aforesaid. 5. We/I further agree that in order to give effect to the guarantee herein contained the Bank shall be entitled to treat us/me as the principal debtor to the Bank for all payment guaranted by us/me as aforesaid to the Bank. 6. We/I further agree that the guarantee herein contained is a continuin one for all amounts due to the Bank by the Borrower under or in respect of the aforesaid advance granted as aforesaid as also for all, interest, cost and other moneys which may from time to time become due and remain unpaid the Bank hereunder.” 8. Upon perusal of the agreement of guarantee with particular reference to the above quoted clauses of the agreement it is clear that the guarantee is not only continuing but is also co-extensive. The respondent no. 2 has agreed to be treated as the principal debtor. 9. Section 128 of the Indian Contract Act, 1872 reads as under :- “128. Surety’s liability - The liability of the surety is co-extensive with that of the principal debtor, unless it is otherwise provided by the contract.” 10. The Hon’ble Supreme Court in the judgment reported in (1992) 3 SCC 159 has held in paragraph 18 that guarantor alone can be sued without even suing the principal debtor, so long as the creditor satisfies the court that the principal debtor is in default. 11. Thus this court finds that the liability of the respondent no. The Hon’ble Supreme Court in the judgment reported in (1992) 3 SCC 159 has held in paragraph 18 that guarantor alone can be sued without even suing the principal debtor, so long as the creditor satisfies the court that the principal debtor is in default. 11. Thus this court finds that the liability of the respondent no. 2 is joint and several with the borrower/guarantors and as per section 128 of Indian Contract Act, 1872 the liability of guarantor is co-extensive with that of the principal debtor, unless it is otherwise provided in the contract. In the instant case the respondent no. 2 by an express agreement has agreed to be treated as the principal debtor. Thus this Court is of the considered view that there is no illegality by the Certificate Officer in proceeding against the respondent no. 2 even in absence of the borrower company and/or its directors. The liability of the respondent no. 2 is joint, several and co-extensive with the principal debtor and they stand on the same footing so far as clearing the liability under the loan is concerned. 12. Admittedly, a letter of revival was executed on 19.06.1984 and a certificate case was filed on 02.02.1987 i.e. within 3 years from the date of letter of revival. Under such circumstances, it cannot be said that the certificate case was barred by limitation. Further the respondent no. 2 had given personal guarantee in connection with the loan to the bank and accordingly, the arrangement between the respondent no. 2 and the company or any subsequent agreement or compromise amongst them has no bearing in the matter. 13. Accordingly, the Certificate Officer vide order dated 30.06.1992 had rightly held the respondent no. 2 liable to clear the dues of the Bank and had rightly rejected the objection filed by the respondent no. 2 under Section 9 of Bihar and Orissa Public Demand Recovery Act, 1914. 14. This Court finds that the impugned order does not deal with the basic issue regarding the limitation and liability of the respondent no. 2 and rather, the authority was swayed away by the fact that the main borrower and the guarantor were not appearing before the Certificate Officer and the entire liability has come upon the respondent no. 2. 14. This Court finds that the impugned order does not deal with the basic issue regarding the limitation and liability of the respondent no. 2 and rather, the authority was swayed away by the fact that the main borrower and the guarantor were not appearing before the Certificate Officer and the entire liability has come upon the respondent no. 2. While passing the impugned order, the revisional authority has totally overlooked the fact that the borrower and guarantor in connection with the loan stand on the same footing and they are jointly and severally liable. Merely because the borrower company and other persons are not appearing before the Certificate Officer, that cannot be a ground to exonerate the guarantor from his personal guarantee in connection with clearing the dues of the Bank. Accordingly, the impugned order dated 26.02.2002 passed in Hazaribagh Certificate Revision No. 64 of 1997 suffers from patent illegality and perversity and is hereby set-aside. 15. This writ petition is allowed and the Certificate Officer, Hazaribagh is directed to immediately take all steps for realization of dues of the bank.