Himachal Pradesh High Court
Sunder Singh vs The H.P. State Cooperative Bank Ltd. & ... on 3 August, 2021
Bench: Tarlok Singh Chauhan, Satyen Vaidya
IN THE HIGH COURT OF HIMACHAL PRADESH SHIMLA
CWP No. 3777/2021
Decided on : 3.8.2021
.
Sunder Singh .....Petitioner
Versus
The H.P. State Cooperative Bank Ltd. & ors. ....Respondents
Coram:
The Hon'ble Mr. Justice Tarlok Singh Chauhan, Judge.
The Hon'ble Mr. Justice Satyen Vaidya, Judge.
Whether approved for reporting?1Yes
For the Petitioner:
r Mr. V.D. Khidtta, Advocate.
For the respondent: Mr. Sushant Vir Singh, Advocate, for
respondents No. 1 and 3.
Mr. Ashok Sharma, A.G. with Mr.
RajinderDogra, Sr. Addl. A.G., Mr. Vinod
Thakur,Mr. Hemanshu Misra, Mr. Shiv
Pal Manhans, Addl. A.Gs., and Mr.
Bhupinder Thakur, Dy.A.G. for
respondent No.2.
(Video Conferencing)
_____________________________________________________________________
Justice Tarlok Singh Chauhan, J. (oral)
The instant petition has been filed for grant of following substantive relief:
"that the impugned orders (Annexure P3 dated 19.8.2016, Annexure P5 dated 6.2./7.1.2020 and Annexure P6 dated 29.6.2021) may kindly be quashed and set aside."1
Whether reporters of the local papers may be allowed to see the judgment? Yes.
::: Downloaded on - 31/01/2022 22:48:33 :::CIS 22 The petitioner stood guarantor for payment of loan .
amounting to Rs.5,55,000/ for none other than his son, Jagdish Kumar, respondent No.4. Since respondent No.4 defaulted in payment of the monthly installment of Rs.8500/, therefore, the respondentBank resorted to the arbitration proceedings, wherein the petitioner stated that he was willing to pay principal amount of Rs.3,97,000/ as Rs.1,58,000/ has already been paid as margin money to the Bank before sanctioning of loan amount.
3 It is averred that the petitioner was surprised to go through the order passed by the learned Arbitrator on 19.8.2016, i.e. the date on which his statement was recorded, wherein the petitioner has been specifically held liable to pay principal amount of Rs.7,00,000/ along with simple interest @ 15% till 31.5.2018 and direction has been issued to the employer of the petitioner to deduct Rs.10,000/ per month from the salary and deposit in the account of respondentBank.
4 Aggrieved by the order passed by the Arbitrator, the petitioner filed a petition under Section 227 of the Constitution of India before this Court, which was registered as CMPMO No. 444/2016. This Court initially stayed the order of Arbitrator and vide order dated 1.5.2017 disposed of the petition reserving ::: Downloaded on - 31/01/2022 22:48:33 :::CIS 3 liberty to the petitioner to resort to such remedy as is available to .
him under H.P. Cooperative Societies Act.
5 In terms of liberty granted by this Court, the petitioner approached the appellate authority, i.e. Additional Registrar, H.P. Cooperative Societies, who, vide final order dated 6.2.2020 proceeded to dismiss the appeal thereby upholding the award. It is against this award that the petitioner has filed the instant petition for grant of the reliefs, as quoted above.
6 It is vehemently argued by Mr. V.D. Khidtta, learned counsel for the petitioner, that the impugned orders holding liable the petitioner to pay the loan amount are contrary to the law, therefore, deserve to be quashed and set aside.
7 We find no merit in the aforesaid contention for more than one reason.
8 It is more than settled that the guarantor's liability is coextensive with that of the principal debtor under Section 128 of the Indian Contract Act, unless it is otherwise provided by the contract.
9 The ThreeJudge Bench of the Hon'ble Supreme Court in State Bank of India vs M/s Indexport Registered and others, (1992) 3 SCC 159, has held as under:
::: Downloaded on - 31/01/2022 22:48:33 :::CIS 4"[12] The Court further held that such directions are neither .
justified under Order XX Rule 11(1) or under the inherent powers of the Court under Section 151 of the Code of Civil Procedure to direct postponement of the execution of the decree.
[13] In the present case before us the decree does not postpone the execution. The decree is simultaneous and it is jointly and severally against all the defendants including the guarantors. It is the right of the decree holder to proceed with it in a way he likes. Section 128 of the Indian Contract Act itself provides that "the liability of the surety is coextensive with that of the principal debtor, unless it is otherwise provided by the contract.
[14] In Pollock and Mulla on Indian contract and Specific Relief Act, Tenth edition, at page 728 it is observed thus:
"Coextensive. Surety's liability is coextensive with that of the principal debtor.
A surety's liability to pay the debt is not removed by reason of the creditor's omission to sue the principal debtor. The creditor is not bound to exhaust his remedy against the principal before suing the surety, and a suit may be maintained against the surety though the principal has not been sued."
[15] In Chitty on Contracts 24th Edition Volume 2 at page 1031 paragraph 4831 it is stated as under: "Prima facle the surety may be proceeded against without demand against him, and without first proceeding against the principal debtor."
[16] In Halsbury's Laws of England Fourth Edition paragraph 159 at page 87 it has been observed that "it is not necessary for the creditor, before proceeding against the surety, to request the principal debtor to pay, or to sue him, although solvent, unless this is expressly stipulated for."
[17] In Hukumchand Insurance Co. Ltd. v.Bank of Baroda, AIR 1977 Karnataka 204, a Division Bench of the High Court of ::: Downloaded on - 31/01/2022 22:48:33 :::CIS 5 Karnataka had an occasion to consider the question of liability .
of the surety vizaviz the principal debtor. Venkatchaliah, J. (as His Lordship then was) observed (Para 12): "The question as to the liability of the surety, its extent and the manner of its enforcement have to be decided on first principles as to the nature and incidents of suretyship. The liabilityof a principal debtor and the liability of a surety which is co extensive with that of the former are really separate liabilities, although arising out of the same transaction. Notwithstanding the fact that they may stem from the same transaction, the two liabilities are distinct. The liability of the surety does not also, in all cases, arise simultaneously."
[18] It will be noticed that the guarantor alone could have been sued, without even suing the principal debtor, so long as the creditor satisfies the Court that the principal debtor is in default.
[19] In Jagannath Ganeshram Agarwala V. Shivnarayan Bhagirath, AIR 1940 Bom 247, a Division Bench of the Bombay High Court,(Kania and Wassoodew JJ.) held that the liability of the surety is coextensive, but is not in the alternative. Both the principal debtor and the surety are liable at the same time to the creditors."
10 As early as in the year 1969, similar question came before the Hon'ble Supreme Court in Bank of Bihar Ltd. v.
Damodar Prasad & Another, 1969 1 SCR 620, wherein their Lordships approved the judgment of the Bombay High Court in Lachhman Joharimal v. Bapu Khandu and Tukaram ::: Downloaded on - 31/01/2022 22:48:33 :::CIS 6 Khandoji, 1869 6 BomHCR 241 in which the Division Bench of .
the Bombay High Court had held as under:
"The court is of opinion that a creditor is not bound to exhaust his remedy against the principal debtor before suing the surety and that when a decree is obtained against a surety, it may be enforced in the same manner as a decree for any other debt."
It was further held:
"The very object of the guarantee is defeated if the creditor is asked to postpone his remedies against the surety. In the present case the creditor is a banking company. A guarantee is a collateral security usually taken by a banker. The security will become useless if his rights against the surety can be so easily cut down."
11 Similar reiteration of law can be found in the judgment of the Hon'ble Supreme Court in Industrial Investment Bank of India vs. Biswanath Jhunjhunwala, (2009) 9 SCC 478.
12 At this stage, it would be apposite to refer to a judgment of the Hon'ble Supreme Court in Ram Kishun and others vs State of Uttar Pradesh and others, (2012) 11 SCC 511, wherein it was held as under:
"10. There can be no dispute to the settled legal proposition of law that in view of the provisions of Section 128 of the Indian ::: Downloaded on - 31/01/2022 22:48:33 :::CIS 7 Contract Act, 1872 (hereinafter called the 'Contract Act'), the .
liability of the guarantor/surety is coextensive with that of the debtor. Therefore, the creditor has a right to obtain a decree against the surety and the principal debtor. The surety has no right to restrain execution of the decree against him until the creditor has exhausted his remedy against the principal debtor for the reason that it is the business of the surety/guarantor to see whether the principal debtor has paid or not. The surety does not have a right to dictate terms to the creditor as how he should make the recovery and pursue his remedies against the principal debtor at his instance. (Vide: The Bank of Bihar Ltd. v.
Dr. Damodar Prasad and Anr., 1969 AIR(SC) 297 Maharashtra State Electricity Board, Bombay v. The Official Liquidator, High Court, Ernakulam and Anr., 1982 AIR(SC) 1497 Union Bank of India v. Manku Narayana, 1987 AIR(SC) 1078 and State Bank of India v. Messrs. Indexport Registered and Ors., 1992 AIR(SC) 1740.
[11] In State Bank of India v. Saksaria Sugar Mills Ltd. and Ors., 1986 AIR(SC) 868 this Court while considering the provisions of Section 128 of the Contract Act held that liability of a surety is immediate and is not deferred until the creditor exhausts his remedies against the principal debtor. (See also: Industrial Investment Bank of India Ltd. v. Biswasnath Jhunjhunwala, 2009 9 SCC 478; and United Bank of India v. Satyawati Tondon and Ors., 2010 AIR(SC) 3413.
[12] Section 146 of the Contract Act provides that cosureties are liable to contribute equally. Thus, in case there are more than one surety/guarantor, they have to share the liability equally unless the agreement of contract provides otherwise."::: Downloaded on - 31/01/2022 22:48:33 :::CIS 8
13 Thus, what can be taken to be settled on the basis of .
law expounded in the aforesaid cases is that the liability of the surety is coextensive with that of the principal debtor and the surety becomes liable to pay the entire debt and further the liability of the surety is immediate and is not deferred until the creditor exhausts his remedies against the principal debtor.
14 That apart, the surety does not have any right to dictate to the creditor his terms by asking to pursue remedy firstly against the principal debtor and to defer the proceedings against him.
15 Above all, the instant petition is not bona fide as it is collusive between the petitioner (father) and respondent No.4 (son).
16 In view of aforesaid discussions, we find no merit in the instant petition and the same is accordingly dismissed, so also the pending application(s), if any, leaving the parties to bear their own costs.
(Tarlok Singh Chauhan) Judge (Satyen Vaidya) 3.8.2021 Judge (pankaj) ::: Downloaded on - 31/01/2022 22:48:33 :::CIS