Delhi District Court
Punjab National Bank vs Sh. Sanjay Fredrick on 14 March, 2024
IN THE COURT OF Ms. NIRJA BHATIA
DISTRICT JUDGE (COMM.) (DIGITAL-07),
SOUTH-EAST DISTRICT, SAKET COURT, NEW DELHI
CS (Comm) 448/2022
Punjab National Bank
Jangpura, Bhogal
Delhi (South)
Pincode - 110014
..... Plaintiff
Vs.
01. Sh. Sanjay Fredrick
RZ-F-1, 336-337
G-1, Gali No. 2B,
Mahavir Enclave,
New Delhi - 110045
Also at
A-127, Sector 22, Noida
Gautam Buddha Nagar,
Uttar Pradesh-201301
02. Smt. Bhawna Fredrick
RZ-F-1, 336-337
G-1, Gali No. 2B,
Mahavir Enclave,
New Delhi - 110045
Also at
A-127, Sector 22, Noida
Gautam Buddha Nagar,
Uttar Pradesh-201301
03. Late Sh. Shiv Kumar Sharma
S/o Sh. Joginder Nath
N-6, Vijay Vihar
Uttam Nagar, New Delhi-110059
..... Defendant
Date of Institution: 13.05.2022
Arguments concluded on: 14.03.2024
Date of Judgment: 14.03.2024
Page 1 of 22
Punjab National Bank Vs. Sh. Sanjay Fredrick
JUDGMENT
Brief facts of the case (1) By this judgment, I shall decide the present suit filed by Punjab National Bank (hereinafter referred as plaintiff bank), a body corporate incorporated under the Banking Companies ( Acquisition and Transfer of Undertakings) Act, 1970, is having its head office at Plot No. 4, Sector-10, Dwarka, New Delhi - 110075 and branch office at Jangpura Delhi-110075 for seeking the relief of recovery of Rs. 19,43,549.11/- along with pendente lite and future interest @ 8.5% P.A. Suit is instituted through Sh. Narender Kumar, Manager and holder of Power of attorney. (2) Plaintiff states that somewhere in the month of February 2015, defendant no. 1 and 2 approached the plaintiff for obtaining housing loan of Rs. 16 lakhs for purpose of purchasing a residential free hold flat bearing no. 1, Ground Floor without roof rights, area admeasuring 50 Sq. Yards, Plot no. RZ-F-1/336- 337 situated at Mahavir Enclave, Delhi-45 from Ms. Kanta Sharma, Sh. Balwant Sharma and Sh. Vishal Sharma against a consideration of Rs. 20 lakhs.
(3) The plaintiff sanctioned a loan of Rs. 16 lakhs in favor of defendant vide sanction letter dated 16.03.2015 at floating rate of interest of 10.25% per annum. The loan was payable in 240 equal monthly installments each amounting to Rs. 15,710/-. The plaintiff and defendant no. 1 and 2 executed loan agreement regarding the terms and conditions of sanction letter on 16.03.2015. An equitable mortgage in favor of plaintiff bank was created vide mortgage deed dated 16.03.2015.
Page 2 of 22Punjab National Bank Vs. Sh. Sanjay Fredrick (4) Plaintiff states that defendant no. 3 Sh. Shiv Kumar Sharma had given a guarantee against the loan in favor of the plaintiff and the agreement for guarantee executed between the parties on 16.03.2015 as per the terms and conditions. (5) Plaintiff alleges that defendant no. 1 and 2 failed to maintain financial discipline and the loan account became irregular. The entire loan was recalled vide letter dated 23.06.2017 and the guarantee was invoked vide letter dated 23.06.2017 against defendant no. 3.
(6) Plaintiff then issued a notice u/s 13(2) of Securitization and Reconstruction of Assets and Enforcement of Security Interest Act, 2002 on 03.07.2017 demanding payment of outstanding of Rs. 15,86,472.11/- due on 30.06.2017 within 60 days. On receipt of the above, defendants assured the plaintiff that they would regularly deposit EMI's. However, the defendant failed to regularize their loan. Final reminder was sent on 21.09.2017 for deposit of overdue of Rs. 31,337/-. The loan was then declared NPA on 30.09.2017.
(7) Plaintiff issued notice u/s 13(2) of SARFAESI Act, on 09.10.2017 declaring and informing the defendant that their account has been turned into NPA on 30.09.2017. The defendant was informed that the loan facility against sanction has been recalled and defendants were called upon to make the entire payment of Rs. 15,59,560.11/- due as on 30.09.2017. (8) Defendant again approached the plaintiff requesting for not taking action against SARFAESI Act, 2002. Despite making assurance, however the defendant failed to keept the financial discipline and was informed that the account is overdue Page 3 of 22 Punjab National Bank Vs. Sh. Sanjay Fredrick by Rs. 35,000/-. As the defendant despite opportunity failed to regularize their loan account, the plaintiff issued a possession notice to borrowers and public in general on 31.01.2018 informing that it has taken possession of the mortgaged property in accordance with the provisions of Section 13(4) of SARFAESI Act 2002 r/w Rule 8 (1) of Security Interest (Enforcement) Rules, 2002. Plaintiff informed the borrowers and public in general that the mortgage property is subject to charge of plaintiff bank for the amount of Rs. 15,59,560.11/-. Defendant no. 1 and 2 gave a balance confirmation letter to plaintiff on 02.03.2018 confirming the outstanding balance of Rs. 15,74,306/- whereafter the defendant regularized their housing loan account but again failed to maintain financial discipline and the loan was again classified as NPA on 08.01.2019. Plaintiff issued a notice u/s 13(2) SARFAESI Act 2002 on 14.01.2019 asking the defendant to pay the outstanding of Rs. 14,00,069.11/- as on 31.12.2018. The notice of possession under Rule 8(1) of Security Interest ( Enforcement ) Rules 2002 was issued on 01.04.2019 informing that defendants have failed to pay sum of Rs. 14,00,069/- from the date of receipt of Section 13(2) notice and the mortgaged property is subject to the charge of the plaintiff bank. Plaintiff states that defendant's have not regularized the loan account maintained and plaintiff hence is entitled to recover the amount of Rs. 19,43,549.11/-.
(9) Prelitigation mediation has been attempted. Plaintiff states that the suit is within limitation. Suit is filed for seeking relief of Rs. 19,43,549.11/-. In the prayer, plaintiff has prayed for Page 4 of 22 Punjab National Bank Vs. Sh. Sanjay Fredrick the relief of interest @ 12% P.A. pendente lite and future interest.
(10) After the suit was instituted process was issued. The defendant no. 1 and 2 were initially unserved. The service on behalf of defendant no. 3 was entered by Sh. Suman Sharma who filed on record the death certificate of Sh. Shiv Kumar Sharma. The plaintiff then moved an application for impleadment of LRs of defendant no. 3. The application was treated U/O 1 Rule 10 CPC and was allowed in 19.05.2023.
(11) In the meanwhile defendant no. 1 and 2 were observed to be served by publication in newspaper "Amar Ujala" on 08.04.2023. In the meanwhile, Sh. Manoranjan Gaud, appeared on behalf of the LRs of deceased defendant no. 3 and filed the reply and informed the address of defendant no. 1 and 2 as A-127, Sector 22, Noida. It was informed by Sh. Majoranjan Gaud, that the bank has taken the possession of the mortgaged property under SARFESI Act which is lying under the seal of the plaintiff bank. However, till the date of decision the plaintiff bank had not reported any steps towards its monetization to the plaintiff's credit. No altered statement of account was placed to suggest that bank has made good the amounts due and claimed the entire outstanding, as bank stated that it took symbolic possession of the mortgaged property. My Ld. Predecessor was pleased to call for the status.
(12) By separate order of 22.08.2023 my Ld. Predecessor was pleased to allow the impleadment of LRs of deceased surety as Defendant no. 3 A (wife) and Defendant no. 3 B ( Daughter). Plaintiff was directed to file the fresh memo of parties. The Page 5 of 22 Punjab National Bank Vs. Sh. Sanjay Fredrick opportunity was given to newly impleaded defendants to file the Written Statement. The joint Written Statement was filed wherein the contents of the plaints were denied and disputed being false and mischievous. It was claimed that the answering defendants had no knowledge of the pendency of the suit which was informed to them by summons in the name of Late Sh. Shiv Kumar Sharma, whereafter Smt. Suman Sharma ( defendant no.
3) appeared before the court on 13.07.2022, and apprised about his demised on 27.05.2017.
(13) It is averred that defendant's have no knowledge or information regarding any guarantee agreement having been made by in favor of the plaintiff by Late Sh. Shiv Kumar Sharma. It was stated that on receiving the copy of plaint and documents, the handwriting of Late Sh. Shiv Kumar Sharma did not appear genuine on the loan application form as well as on the agreement of guarantee. It was alleged that the Pan Card and Driving Lincense of Late Sh. Shiv Kumar Sharma were misused by the plaintiff in connivance and in furtherance of the ulterior motives of defendant nos. 1 and 2. It was stated that Late Sh. Shiv Kumar Sharma never informed the answering defendants about giving any guarantee during his lifetime and no document of any nature whatsoever has been executed by the answering defendants. The jurisdiction of the court was doubted and it was claimed that since the property in question is situated at Mahavir Enclave, New Delhi, there is no jurisdiction with the present District of South-East.
(14) It was averred that plaintiff has already obtained symbolic possession under SARFAESI Act and instead of Page 6 of 22 Punjab National Bank Vs. Sh. Sanjay Fredrick initiating the action to realize the amounts, the plaintiff is harassing the answering defendants. It was alleged that plaintiff has taken no genuine steps to recover the amounts from defendant no. 1 and 2 the actual creditors / principal borrowers who are willfully defaulting in payment and hence the plaintiff is not approaching the court with clean hands. Reliance was made on Ramjas Foundation & Ors vs Union Of India & Ors, DOD 9 November, 2010, 14SCC 38. The answering defendants also claimed that since the suit is in contravention to the provisions of Order 11 Rule 1 CPC as amended by Commercial Courts Act as it does not specify the documents in power, possession, control and custody of the plaintiff being original office copies or photocopies and as the list fails to set out even in brief the details of the parties to each document mode of execution, issuance of receipt and line of custody of each document, the bare perusal of which list makes it evident that plaintiff is standing in contravention to the provisions of Order 11 and the suit is liable to be dismissed. It is averred that the plaintiff is standing in contravention to the provisions of Order 7 Rule 2 A CPC 1908 which stipulate regarding the pleadings finding part of the statement regarding interest and puts the plaintiff under burden to set out details under sub-rule 2 and 3 and as though the plaintiff has in the prayer clause sought interest @ 12% has failed to make any pleading whatsoever in the plaint averring the rate of interest as per the provisions of Order 7 Rule 2 A CPC, plaint is also liable to be dismissed. The statements on merits were denied and disputed. The execution of guarantee agreement, the handwriting and signatures of deceased Sh. Shiv Kumar Sharma are Page 7 of 22 Punjab National Bank Vs. Sh. Sanjay Fredrick specifically denied. It was alleged that PAN, License photograph are misused by the plaintiff in connivance with defendant no. 1 and 2. The statements regarding the financial indiscipline of defendant no. 1 and 2 were denied for want of knowledge. It was claimed that plaintiff is not desirous to proceed with the suit in terms of law and is only intending to harass the LRs of the deseased Sh. Shiv Kumar Sharma with mischievous intentions. No replication to the Written Statement of defendant was filed. Issues (15) The issues were framed vide proceedings dated 13.02.2024, as below:-
(I) Whether the plaintiff is entitled to any relief as prayed for? OP Plaintiff.
(II) Whether plaintiff is entitled to any relief from defendant no. 3 and 4, the LRs of the deceased of guarantor? OP Parties. (III) Whether any interest is payable if so at what rate? OP Plaintiff.
Zist of Plaintiff's Evidence (I) The examination in chief (16) In pursuance, plaintiff through AR Sh. Dayavan, Senior Manager has tendered his examination. The following documents were exhibited:-
(I) Copy of General Power of Attorney dated 12.02.2015, Ex. PW-1/1 (II) Original application form for home loan dated 16.03.2015 alongwith copy of identity cards of defendants, Ex. PW-1/2.
(III) Original sanction letter dated 16.03.2015, Ex. PW-1/3.
(IV) Original agreement for housing loan dated 16.03.2015, Ex. PW-1/4.
(V) Original mortgage deed dated 16.03.2015, Ex. PW-1/5.
Page 8 of 22Punjab National Bank Vs. Sh. Sanjay Fredrick (VI) Original agreement for guarantee dated 16.03.2015 alongwith power of attorney, Ex. PW-1/6 (VII) Original reminder letter dated 23.06.2017, Ex. PW-1/7.
(VIII) Original guarantee invocation letter dated 23.06.2017, Ex. PW-1/8.
(IX) Original notice under Section 13(2) of Securitization and Reconstruction of Assets and Enforcement of Security Interest Act (SARFAESI), 2002 dated 03.07.2017 issued to defendants No.1, 2 and 3, Ex. PW-1/9 (X) Original reminder letter dated 21.09.2017, Ex. PW-1/10.
(XI) Original notice under Section 13(2) of SARFAESI Act dated 09.10.2017 issued to all three defendants, Ex. PW-1/11 (XII) Original letter dated 12.01.2018 issued to defendants No. 1 and 2, Ex. PW-1/12.
(XIII) Original possession letter dated 31.01.2018, Ex. PW-1/13.
(XIV) Original balance and security confirmation letter dated 02.03.2018, Ex. PW-1/14.
(XV) Original notice issued under Section 13(2) of SARFAESI Act dated 14.01.2019, Ex. PW-1/15. (XVI) Original possession notice dated 01.04.2019, Ex. PW-1/16.
(XVII) Statement of account alongwith certificate under Section 2A of Bankers Book of Evidence Act, Ex. PW-1/17 (XVIII) Non-Starter Report dated 21.02.2022, Ex. PW- 1/18.
(ii) Zist of cross-examination / submissions and assessment of reasons for arriving at judgment below:-
(17) However, during the cross-examination while the witness admitted to be in employment with plaintiff and having joined the present branch w.e.f. 01.03.2023 admitted that he had no personal knowledge of either the present account or of the transaction. He was then shown Ex.PW1/2 (colly) i.e. the copy Page 9 of 22 Punjab National Bank Vs. Sh. Sanjay Fredrick of the identity cards, the photocopy of the driving license and PAN Card and was asked two questions specifically as below:-
"Can you state from where the signature has been verified on the copy of the PAN card and driving licence". The reply is noted as (A). " It must have been verified from the original at the time of receipt". At this stage, it is necessary to note that the demeanor of the answer is probable, speculative and in essence evasive. In order to obtain clarity, he was asked the source of verification to which I will revert a little later and before that it is noted that from the bare perusal of the document i.e. the PAN Card and Driving license, the signatures below " Verified" are not showing the name of the executant. No source of verification is stated on the documents. No record is placed to state who verified the document and from what source. The fact that witness himself was not very sure of this aspect of verification reflected clearly in the evasive reply, the demeanor of which is apparent from the statement " It must have been verified from the original at the time of receipt". The nature of the answer is laden with uncertainity and hence this part of the statement is to be read with caution and needs proper corroboration from the other material on record.
(18) It is observed that the witness clarified that he was not present at the time of execution of documents and was not a witness to the act of execution. He admitted that he has no personal knowledge as from which particular document the verification is made. The plaintiff failed to explain in the pleadings and / or during the examination at the stage of execution of document itself, the source of authentication and Page 10 of 22 Punjab National Bank Vs. Sh. Sanjay Fredrick verification of this piece of the document. He was then confronted with Ex.PW1/3 which is the loan agreement. He was then asked the question as below:-
Ques. Can you state the name of the person who has executed the loan on behalf of the plaintiff, to which he answered " I cannot identify the signatures and cannot state the name of the person who executed the loan on behalf of the bank". He then added that I do not know that if the person who got the loan executed is still under the Employment of Bank or not. Though, he denied the suggestion put to him that all documents Ex.PW1/1 to Ex.PW1/6 are forged and fabricated. No material in form of evidence could come to prove the proper execution of the documents as per the law.
(19) The document Ex.PW1/2 (colly) starts from the application for home loan in name of Sh. Sanjay Fredrick and Ms. Bhawna Fredrick. The loan application is only signed towards the end without any date. The particulars of the signatures of the principal borrower Sh. Sanjay Fredrick, his name and details of date and place are missing. The Enclosure 'A' is also signed by Ms. Bhawna Fredrick and is blank. The guarantors information bears the signature below on which no name is assigned on the photo of Shiv Kumar Sharma. The contents of the application are blank and vital informations have been omitted from being filled. No date, place of execution on the declaration etc are omitted. The application for housing loan Ex.PW1/3 is bearing signatures, however, the name of the executant as authorized signatory on behalf of plaintiff are not stated. The application is dated 16.03.2015, however, along with Page 11 of 22 Punjab National Bank Vs. Sh. Sanjay Fredrick the said the Annexure '2' is Blank. Same is the status of credit facility sanction as Annexure 4 & 5. In view thereof, it is not safe to conclude that any genuine effort has been made by the plaintiff bank to prove the execution of the loan agreement itself.
In context of documents executed by banks the provision of Section 2 A of Banking Companies Evidence Act is applicable which provides a presumption of the documents being of true nature. However, the bare perusal of the documents show that the application is also a photocopy printout of an application form and has been partially hand filled. No certification u/s 2 A is appended below the documentations. The reasons for keeping the annexures which are part of the loan application blank and unfilled is stated. Annexure 2 which is part of the loan application is an acknowledgement of deposit of title deeds by way of equitable mortgage and is a blank document. Annexure 4 which is credit facility sanctioned in favor of borrowers is a blank document. Both these documents are not signed by deceased Sh. Shiv Kumar Sharma, so as to extend any liability on the defendants 3 A and 3 B who have been impleaded post the order made by Ld. Predecessor on 22.08.2023. (20) In the context of the dispute raised, the document Ex.PW1/6 (colly) is stated to be the agreement of guarantee. Interestingly this document is not signed by any bank official on any page except the last page which is showing the stamp of R.K. Nigam. Despite the above, the plaintiff has not made any effort to call Sh. R.K. Nigam, the executant of the agreement of guarantee as witness. More so, when PW-1 has specifically denied the Page 12 of 22 Punjab National Bank Vs. Sh. Sanjay Fredrick execution of the transaction in his presence and has denied to identify the signatures.
(21) At the stage of final arguments, Ld. Counsel for the plaintiff stated that the bank officials are generally in transferable jobs, however, it is averred by the Senior Manager Sh. Anil Sharma that the official incharge of affairs of the time when documentation was done is behind behind bars in connection with some matter. In which background the plaintiff atleast should have taken or initiated steps of summoning the requisite witness and or any other person who could have at least identified the signatures of the executing authority on behalf of the bank and or would have had the occasion to deal with the parties in this case and the transaction.
(22) The averments being made by Ld. Counsel for the plaintiff to take a view different from the normal cases for the reason that the plaintiff in this case is a bank appears to influence the court's savvy and opinions on the ground that the plaintiff being a public sector bank must be treated differently, from other contesting parties, in a litigation, which seems to be in contravention to the test of 'fair play', 'equity' and neutrality of the courts in balancing the rights of both parties without favour and ferver and hence cannot be accepted. The plaintiff for the purposes of being a public sector bank rather should have been more diligent in conduct as it holds the public trust and interest to protect public money.
(23) From the facts of the case in the examination and cross-examination, it is apparent that despite the opportunity of Page 13 of 22 Punjab National Bank Vs. Sh. Sanjay Fredrick evidence being made available to plaintiff, the steps have not been seriously taken. From the record, plaintiff could not show any genuine steps having been taken to serve the principal borrower despite the answering defendants stating their actual address and telephone number. The plaintiff after carrying out service U/O 5 Rule 20 CPC by substitute mode and serving an order of exparte on its strength kept silent and sought no fresh service despite the defendants, trying to extract an effort from plaintiff to secure the presence of principal debtor and served them with the requisite details. No effort has been made to corroborate the documents when the genuineness of the documents and signature of the executants were specifically doubted in the Written Statement itself. It is not a case where plaintiff was not aware of such a context being raised. (24) At this stage, Ms. Subhi Singh has stated that the plaintiff has filed the original documents, however, the said plea also seems to have been made half-heartedly. The document filed on record are clear reflection that the photo-copy printout of the forms have been obtained and filled, missing out all the requisite details such as that of date of execution, place of execution, name of the persons specifically stating the execution, their competence and authority and the proof of their identity having been properly verified. Plaintiff has not filed any form of signature verification. In view thereof, mere submission that the loan agreement is deemed to have been proved for the reason that it is filed in original is misplaced. When the plaintiff's witness himself admitted to documentation being incomplete and Page 14 of 22 Punjab National Bank Vs. Sh. Sanjay Fredrick inconclusive by stating " the bank carries out the due diligence enquiry of the borrower as well as the guarantor before execution of the loan. There is no due diligence report filed on record by the plaintiff qua the guarantor. It is correct that plaintiff is responsible to fill all the requisite details in the columns of the agreement for grant of loan". He also admitted as " It is correct that despite having permanent address of principal borrower, the notices have not been sent to said address at which stage, he volunteered that notices were sent at the residential address disclosed by defendant no. 1 and 2. The afore-stated answer clearly indicate the mode and manner in which the due diligence has been carried out. The death nail to the issue of question of genuineness and the proper mode of execution as well as the maintenance of the account in due course is then caused by the question and answer below:-
At this stage, witness is asked to look into account statement, Ex. PW-1/17, and is asked the following question:
"Ques: Can you state the date on which the loan was disbursed?
Ans: There is no entry in Ex. PW-1/17 to show the date of disbursement. (Vol. It was disbursed in the year 2015 as the loan account was opened on 16.03.2015).
"It is correct that the document Ex. PW-1/17 does not reflect all the entries right from the beginning of loan account till date". I cannot say "the person who certified the statement of account Ex. PW-1/17 under Section 2A of Bankers Book Evidence Act. I cannot identify the signature nor do I know the name of the person".Page 15 of 22
Punjab National Bank Vs. Sh. Sanjay Fredrick (25) After the aforesaid, no ground is available to rely on any piece of the statement of account Ex.PW1/17. The plaintiff being a public sector bank cannot be allowed to take a plea of leniency on the ground of it being a public sector bank holding the money of public interest and at the same time omitting to perform its own part of duty. Plaintiff cannot be allowed to reap advantage of its own wrongs of not keeping the documents in order and showing no reason for not maintaining the statement of account in due course. In fact, in such circumstance even the certification u/s 2A of Bankers Book of Evidence Act is to be doubted for its credibility and must be viewed with suspicion. Having regard to circumstances above, coupled with the observations made by Ld. Predecessor in orders / proceedings dated 22.08.2023 and 05.10.2023 repeatedly inquiring from the plaintiff for inaction in auctioning the property despite having sealed and seized the same under SARFAESI Act, shows that the plaintiff at no stage has been diligent in connection with the present loan account and / or keeping any intention alive of recovery of the proceeds. In circumstances above the plaintiff has measurably failed as the statement of account Ex.PW1/17 cannot be treated to have been an authentic piece of statement maintaining and holding correct entries in routine and general course but rather reflects engagement of the official of plaintiff in its manipulation and accordingly the recourse u/s 34 of Evidence Act cannot be extended to the above. By mere filing the documents and exhibiting them and raising the pleas will not be a sufficient proof as observed by Hon'ble Supreme Court in Anil Rishi vs Gurbaksh Singh, Appeal (civil) 2413 of 2006, DOD Page 16 of 22 Punjab National Bank Vs. Sh. Sanjay Fredrick 02.05. 2006. The material portion is extracted and is reproduced below:-
8. The initial burden of proof would be on the plaintiff in view of Section 101 of the Evidence Act, which reads as under:
"101. Burden of proof. Whoever desires any court to give judgment as to any legal right or liability dependent on the existence of facts which he asserts, must prove that those facts exist.
When a person is bound to prove the existence of any fact, it is said that the burden of proof lies on that person."
10.......................................... The suit will fail if both the parties do not adduce any evidence, in view of Section 102 of the Evidence Act. Thus, ordinarily, the burden of proof would be on the party who asserts the affirmative of the issue and it rests, after evidence is gone a into, upon the party against whom, at the time the question arises, judgment would be given, if no further evidence were to be adduced by either side.
(26) Further mere exhibition of documents does not tantamounts to a conclusive proof as is held in Sudir Engineering Company vs Nitco Roadways Ltd., DOD 23 March, 1995, RLR 286, Sait Tarajee Khimchand And Ors. vs Yelamarti Satyam Alias Satteyya, (4) SCC 562, DOD 19 April, 1971 and Narbada Devi Gupta vs Birendra Kumar Jaiswal And Anr, 8 SCC 745, DOD 3 November, 2003.
Page 17 of 22Punjab National Bank Vs. Sh. Sanjay Fredrick (27) At this stage of discussion, I am compelled to test the maintainability of the action against the LR's of deceased Sh. Shiv Kumar Sharma ( the guarantor ). The mandate of the present cause is viewed under the lense of Section 131, Indian Contract Act which bears any action on account of death of surety unless otherwise provided. The provision for reference is noted as below:-
131. Revocation of continuing guarantee by surety's death.--The death of the surety operates, in the absence of any contract to the contrary, as a revocation of a continuing guarantee, so far as regards future transactions (28) The law of contract act specifically states about the nature of an agreement of guarantee. Section 126 which defines a contract of guarantee is taken note for reference as below:-
126. "Contract of guarantee", "surety", "principal debtor"and "creditor".--A "contract of guarantee" is a contract to perform the promise, or discharge the liability, of a third person in case of his default. The person who gives the guarantee is called the "surety"; the person in respect of whose default the guarantee is given is called the "principal debtor", and the person to whom the guarantee is given is called the "creditor".
A guarantee may be either oral or written.
(29) The nature of an agreement of guarantee has come under discussion before the Court in Tammineni Pullaiah and Others Vs. C. Muthaiah and Others, A.S. No. 1776 of 1998, 2018 SCC Online Hyd 2173, DOD 09.11.2018 wherein the observation were made which are extracted:-
Page 18 of 22Punjab National Bank Vs. Sh. Sanjay Fredrick
12............It is clear from the above definition that contract of guarantee involves three parties, the creditor the surety and the principal debtor. A contract of guarantee must therefore involve a contract to which all those three parties are privy. Their express participation or implied assent to have such a contract must be proved by the person who wants to rely upon it.
In Ramachandra v. Shapuri (AIR 1940 Bom 315) Beaumont, C.J., speaking for the Bench of the Bombay High Court observed at pages 316 and 317:
"there must be a contract, first of all, between the principal debtor and the creditor. That lays the foundation for the whole transaction. Then there must be a contract between the surety and the creditor, by which the surety guarantees the debt, and no doubt the consideration for that contract may move either from the creditor or from the principal debtor or both. But if those are the only contracts, in my opinion the case is one of indemnity. In order to constitute a contract of guarantee there must be a third contract, by which the principal debtor expressly or impliedly requests the surety to act as surety. Unless that element is present, it is impossible in my view to work out the rights and liabilities of the surety under the Contract Act. Section 145 provides that in every contract of guarantee there is an implied promise by the principal debtor to indemnify the surety. It is Impossible to imply a promise by the principal debtor to indemnify the surety unless the principal debtor is privy to the contract of suretyship."Page 19 of 22
Punjab National Bank Vs. Sh. Sanjay Fredrick These observations/reflect the true legal position with regard, to a contract of guarantee."
13. The next important decision that falls for consideration is Radha Kanta Pal Vv United Bank of India Ltd. (2) AIR 1955 Cal 217. At paragraph 28 of the Judgment, the learned Single Judge relied upon Halsburys, Hailsham Edition, page 59, Article 52. It reads as under:
"A contract of guarantee unlike a contract of insurance is not one of uberrimae fidei but a contract "strictissima juris." (16 Halsbury, Hailsham Edition, page 59, Article 52),
14. As per the Merriam Webster's "Dictionary of Law" the meaning of "strictissima juris" is according to the strictest interpretation of law. It is thus clear that a contract of guarantee has to be interpreted very strictly.
(29) In view of the aforementioned law, the facts of the present case also suggests that Ex.PW1/3, the loan agreement is signed only by the principal borrower / creditors Sh. Sanjay Fredrick and Ms. Bhawna Fredrick and the guarantee agreement only bears purported signatures of late Sh. Shiv Kumar Sharma ( without full particulars ), there is no material providing a bridge to show that the principal borrowers and surety were privity to same intent by an explicit contract of guarantee. There is no material to even attribute knowledge of late Sh. Shiv Kumar Sharma being surety to principal borrowers or vice-versa. Least an agreement being executed by all the three material parties i.e. plaintiff on one side, defendants no. 1 and 2 being principal borrowers and guarantor Sh. Shiv Kumar Sharma on another Page 20 of 22 Punjab National Bank Vs. Sh. Sanjay Fredrick side. There has been no material to show that the principal debtor / borrower Sh. Sanjay Fredrick and Ms. Bhawna Fredrick and Late Sh. Shiv Kumar Sharma were ad item qua the liability to fall on guarantor in case of default committed by principal borrowers and corresponding consent to such an intent having been arrived at by all the above three named persons as well as the plaintiff bank in the absence of above the guarantee agreement Ex.PW1/6 as it is sought to be claimed is to be construed merely an indemnity which must be treated to have been extinguished on account of demise of Sh. Shiv Kumar Sharma and its import and effect cannot be stretched to defendant no. 3A and 3B.
(30) Another issue that need to be dealt with and is arising out of the interpretation of the provisions of Section 131 of Indian Contract Act is that the defendant no. 3 A and 3 B could not have been held liable and responsible for any amount beyond the estate left behind Late. Sh. Shiv Kumar Sharma. The plaintiff has miserably failed even to detail any particulars pertaining to succession of assets left by Sh. Shiv Kumar Sharma in favor of defendant 3A and 3B. No iota of pleadings have come on record. Consequent to the application U/O 1 Rule 10 CPC having been engaged and entertained, the plaintiff was duty bound to make a requisite amendment in the plaint by bring an suitable application. At this stage, the defendant no. 3A and 3B cannot be burdened for the contents or the claim which has never been pleaded against them since inception.
Page 21 of 22Punjab National Bank Vs. Sh. Sanjay Fredrick (31) In circumstances above, plaintiff has measurably failed to prove its part of the claim suit of the plaintiff is dismissed with no orders to cost.
File be consigned to the Record Room after completion of necessary formalities.
(Nirja Bhatia) District Judge (Comm.) Digital-07 South East, Saket Courts Delhi 14.03.2024 Page 22 of 22 Punjab National Bank Vs. Sh. Sanjay Fredrick