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Bank of India V/S Suneel Kumar Dubey and Others.


    F.A. No. 522 of 1998

    Decided On, 29 May 2017

    At, High Court of Madhya Pradesh

    By, THE HONORABLE JUSTICE: ANJULI PALO

   



Judgment Text

1. This appeal has been filed by the appellant/plaintiff under Section 96 of the Code of Civil Procedure, against the judgment and decree dated 3.9.1998, passed by the District Judge, Sehore, in Civil Suit No. 6B of 1995, whereby the claim for recovery of Rs. 2,06,582/- was disallowed. During the trial, learned Trial Court proceeded ex parte against respondent No. 1, who is the main borrower.

2. In short, appellant/plaintiffs case is that respondent No. 1 having taken loan of Rs. 1 lakh from the appellant/Bank on 14.4.1984 for purchasing a Mini Bus. For this transaction, many documents have been executed by the respondents. They have taken joint liability to repay loan account. Respondent Nos. 3 and 4 were the guarantors. They also executed the guarantee letter in favour of appellant/plaintiff Bank. The respondent Nos. 1 and 2 were the defaulters in regular payment. Therefore, notices were issued by the appellant to the respondents. The respondents failed to repay the loan. Therefore, the appellant/Bank filed the civil suit.

3. Respondent Nos. 3 and 4 in their written statements denied their liability, They have stated that Bank is entitled to recover its loan by selling the aforesaid minibus for which loan has been taken by the respondent No. 1 but the appellant had not proceeded against the respondent No. 1 to recover the entire amount in lump sum. Therefore, the agreement with respondent Nos. 3 and 4 as guarantors has become ineffective. They are not responsible to repay the loan amount and Bank is not entitled to recover the loan amount from them.

4. Learned trial Court found that the respondent No. 1 had taken loan from the appellant/Bank for purchasing a Mini Bus on 14.4.1984 and the respondent Nos. 2 to 4 undertake the guarantee for repaying the aforesaid loan along with the respondent Nos. 1. The learned trial Court has not appreciated that being a guarantor of respondent No. 1, liability of the respondent Nos. 2 to 4 co-existed with the principal borrower and holding that the respondent Nos. 3 and 4 have no liability to pay the amount because their guarantee has been ineffective. Decree has been passed only against the respondent Nos. 1 and 2 for recovery of Rs. 2,06,582/- with interest @ 12.5% per annum.

5. The appellant/Bank has challenged the above findings on the grounds that learned trial Court has erred in arriving the findings that agreement of the respondent Nos. 3 and 4 has come to an end without any cogent and reliable evidence. The condition of the contract between the parties cannot come to an end unilaterally without the consent of other parties and the respondent Nos. 3 and 4 have executed the guarantee deed in favour of the appellant/Bank. They cannot absolve from their liability to repay the entire loan amount. Therefore, the appellant has prayed to modify the judgment and decree against the respondent Nos. 3 and 4 and liability be imposed against them along with the respondent Nos. 1 and 2.

6. Having heard learned Counsel for the parties, perused the record and impugned judgment.

7. In Para 4 of the impugned judgment, learned trial Court has framed issues No. 3 and 3 which reads as under:



8. It is important to note that with regard to above issue findings are affirmative against the respondent Nos. 2 to 4 because they were guarantor in the disputed loan. Even then, learned trial Court exonerated them from the liability to repay the loan along with respondent Nos. 1 and 2.

9. Para 7 of the judgment is important that, learned trial Court has held that the respondent Nos. 2 and 4 undertake the guarantee of the respondent No. 1, to repay the loan and executed guarantee deed Ex. P/7. They have also admitted their signatures in the guarantee deed Ex. P/7. Deciding the issue No. 11(B), learned trial Court exonerated the respondent Nos. 3 and 4 on the ground that Section 139 of the Indian Contract Act. The guarantee given by the respondent Nos. 3 and 4 has become ineffective because the appellant/Bank failed to recover the entire amount from the respondent No. 1.

10. At page 10 of the impugned judgment in the 5th and 6th lines, it is found that the vehicle purchased by the respondent No. 1 has no value now (at the time of his evidence) nor any condition has been imposed upon the parties. Even then, learned trial Court exonerated the respondent Nos. 3 and 4.

Section 139 of the Indian Contract Act is provides as under:

"If the creditor does any act which is inconsistent with the rights of the surety, or omits to do any act which his duty to the surety requires him to do, and the eventual remedy of the surety himself against the principal debtor is thereby impaired, the surety is discharged."
The wordings of the aforesaid section show that, some condition on which guarantor can be discharged from liability of repayment.

11. A surety who seeks to be relieved of the obligation imposed upon him as surety and to be absolved from the liability must not only show that the creditor has, by his acts or conduct, either prevented debtor from doing the things which he undertook to do, or has connived at the debtor's omission to do those things or has enabled him to do something which he ought not to have done, he must also show that the creditor has done some act inconsistent with the rights of the surety, or omitted to do any act which his duty towards the surety required him to do within the meaning of Section 139. Thus, before the surety is discharged the following two conditions must be satisfied, (1) the creditor must do an act which is inconsistent with the rights of the surety or he must omit to do any act which his duty to the surety requires him to do; and (2) by the action or inaction of the creditor referred to in ground (one), the eventual remedy of the surety himself against the principal debtor is impaired. The said two conditions were not fulfilled in the present case.

12. The creditor's right to hold his securities until his whole debt is paid is paramount to surety's claim upon such securities, which only arises when the creditor's claim against such securities has been satisfied. The liability of surety is not deferred until remedies against principal debtor are exhausted.

13. Section 140 of the Indian Contract Act, 1872 provides that, 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.

14. In the case of C.L. Aboobacker v. K.P. Ayishu : AIR 2000 Karnataka 29 (NOC), it is held that guarantor is liable for any payment or performance of any obligation only to the extent the principal debtor has defaulted.

15. Section 145 of the Indian Contract Act provides implied promise to indemnify surety. It provides that in every contract of guarantee there is an implied promise by the principal debtor to indemnify the surety, and the surety is entitled to recover from the principal debtor whatever sum he has rightfully paid under the guarantee, but no sum which he has paid wrongfully. T

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herefore, the guarantor i.e. the respondent Nos. 3 and 4 are liable to repay the loan amount and they are entitled to recover it from the principal debtor. 16. In the light of above legal provisions, the findings of learned trial Court are not according to law and not according to the documents executed by the respondent Nos. 3 and 4 in favour of the appellant/Bank. The findings of learned trial Court are totally erroneous and perverse, hence liable to be set aside. 17. Accordingly, this appeal is allowed. The findings of learned trial Court in favour of the respondent Nos. 3 and 4 to exonerate them, from the liability to repay the loan amount are hereby set aside. The appellant/Bank is entitled to recover the balance amount from the respondent Nos. 3 and 4 as well as respondent Nos. 1 and 2. No order as to costs.
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