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2019 DIGILAW 179 (GUJ)

Bharatbhai Sagalchand Thakkar v. State of Gujarat

2019-02-28

ANANT S.DAVE, BIREN VAISHNAV

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ORDER : ANANT S. DAVE, J. 1. The appellant has filed this appeal under Clause 15 of the Letters Patent challenging oral order dated 13.12.2018 passed by the learned Single Judge in Special Civil Application No.13339 of 2015 confirming the order dated 13.03.2015 passed by the Gujarat State Cooperative Tribunal, Ahmedabad, in Appeal No.438 of 2006 arising from the Summary (Lavad) Case No.367 of 2004. 2. There is no dispute for certain facts recorded in paras 2.1 and 2.2 of order dated 13.12.2018 and for ready reference paras 2.1 and 2.2 are reproduced hereunder: “2.1 The respondent No.2 is a Cooperative Society registered under the Gujarat Cooperative Societies Act, 1961 (for short “the Act, 1961”) and is engaged in the business of finance. It appears from the materials on record that one of the members of the respondent No.2 Society, namely Nayanbhai Mafatbhai Ghelot, availed cash credit facility to the tune of Rs.2,00,000/- from the Society some time in October, 2001. The applicant herein and one another person by name Rajeshkumar Gulabchand Panchal stood as the guarantors. It appears that as the original borrower defaulted in repayment of the loan amount, the Society instituted the Summary (Lavad) Suit No. 367/2004 before the Board of Nominees. The Lavad Suit came to be filed under the provisions of Section 96 read with Section 99(8) of the Act, 1961 for recovery of Rs.2,62,874/-. 2.2 The suit came to be filed against the original borrower and the two guarantors. The Board of Nominees, by judgment and award, decreed the suit against the original borrower and one of the guarantors, namely Panchal Rajeshkumar Gulabchand. However, the Board of Nominees thought fit to dismiss the suit against the applicant herein. The applicant came to be discharged by the Board of Nominees from his liability as one of the guarantors.” 3. Mr.Bachani, learned counsel for the appellant, however, would contend that though the Board of Nominees discharged the appellant from his liability, the reversal of the order of Board of Nominees by the Tribunal was uncalled for inasmuch as individually the appellant was not liable to pay the loan amount. Since loan was disbursed in favour of original borrower and even society was not clear about the entire loan transaction, the decision taken by the Board of Nominee was just and proper and within four corners of law. Since loan was disbursed in favour of original borrower and even society was not clear about the entire loan transaction, the decision taken by the Board of Nominee was just and proper and within four corners of law. It is further submitted that ordinarily, duty is cast upon the cooperative society or the bank, as the case may be, first to recover loan advanced to borrower and then to take steps against the guarantor. By referring to crossexamination Exh.47 conducted by learned advocate of plaintiff society wherein it was stated that he knew respondent No.2 as his friend and admitted that he put his signatures as surety in the documents of the loan transaction and also admitted further that his signatures might have been obtained at the time of renewal. By inviting our attention to Section 141 of the Indian Contract Act, 1872, which pertains to right of the surety to benefit of creditor's securities, it is submitted that a surety is entitled to the benefit of every security which the creditor has against the principal debtor at the time when the contract of suretyship is entered into, and that whether the surety knows of the existence of such security or not, and if the creditor loses, or without the consent of the surety, parts with such security, the surety is discharged to the extent of the value of the security. 3.1 If the above section is considered, according to learned counsel for the appellant, the appellant stood discharged to the extent of value of the security in view of nature of transaction which had taken place. Hence, the appeal deserves to be allowed by interfering with the order passed by the learned Single Judge in Special Civil Application. 4. As against the above, Mr. Shah, learned counsel for the respondent would contend that as basic tenet of law, that the guarantor's liability is coextensive to that of the borrower and law needs no further interpretation as Section 128 of the Indian Contract Act is very specific that the liability of surety is coextensive with principal debtor unless it is otherwise provided by the contract, and in the facts of the present case, if the contract is perused, the guarantor was not absolved from such liability. 5. 5. Having heard learned counsels for the parties and what is considered by the learned Single Judge after recording facts and certain findings reached by the Tribunal based on analysis of testimonies of witnesses and documents, it was concluded that by discharging the appellant herein from his liability, the Board of Nominees committed serious error and presumption drawn by the Board of Nominees that notice was not issued to the respondent No.2 before instituting the suit was not in accordance with law and considering the provisions of the law so applied by the Board of Nominees that the respond had discharged as a surety was not relevant since there was no provision of issuing notice to guarantor before instituting the suit. 5.1 In the facts of this case applicability of Section 141 of the Indian Contract Act is ruled out. 5.2 Even before the learned Single judge, learned advocate appearing for the appellant herein was unable to dispute the fact that the appellant petitioner stood as a guarantor and signed the guarantee deed and other documents. In view of the above, learned Single Judge observed and held in paras 8 and 9 as under: “8. Mr. Bachani, the learned counsel appearing for the applicant was confronted with the findings recorded by the Tribunal referred to above. Mr. Bachani, with his usual fairness, submitted that he cannot get away from the fact that his client stood as a guarantor. Mr. Bachani also accepted the fact that his client did sign the guarantee deed and other documents. However, Mr. Bachani sticks to his submission as regards the action on the part of the Society to directly proceed against the original borrower and also the inaction to attach the shop. 9. I am afraid, it is not possible for me to accept the submissions of Mr. Bachani. The law is now well settled. The liability of a guarantor is coextensive with that of the original borrower. It is always open for the Society to first proceed against the guarantor for the recovery of the loan amount. It is not necessary that the Society should first go after the original borrower and only thereafter proceed against the guarantor.” 5.3 The above reasoning of the learned Single Judge cannot be faulted with so as to exercise appellate jurisdiction by this Court in the present appeal. 6. In absence of any merit, this appeal stands dismissed. It is not necessary that the Society should first go after the original borrower and only thereafter proceed against the guarantor.” 5.3 The above reasoning of the learned Single Judge cannot be faulted with so as to exercise appellate jurisdiction by this Court in the present appeal. 6. In absence of any merit, this appeal stands dismissed. Consequently, Civil Application for stay stands disposed of.