Orissa High Court
Orissa State Financial Corporation vs Sk. Rasul Baksh on 14 May, 1999
Equivalent citations: [2001]103COMPCAS53(ORISSA)
Author: Pradipta Ray
Bench: Pradipta Ray
JUDGMENT Pradipta Ray, J.
1. The Orissa State Financial Corporation (hereinafter referred to as "the Corporation") advanced a loan to the respondent, Sk. Rasul Baksh, proprietor of Janata Coal Industry. The respondent executed a deed of hypothecation and also a deed of personal guarantee. As the loan was not repaid, the Corporation in exercise of the powers under Section 29 of the State Financial Corporations Act sold the hypothecated properties. After adjustment of sale price of the hypothecated goods, there were still considerable outstanding dues against Sk. Rasul Baksh. To realise the outstanding amount the Corporation filed an application under Section 31 of the State Financial Corporations Act (hereinafter referred to as "the Act") before the District Judge, Cuttack, which was registered as Misc. Case No. 131 of 1991. By judgment and order dated September 6, 1996, the District Judge dismissed the said application on the ground that remedy under Section 31(1)(aa) of the Act is not available in order to enforce personal liability of the borrower himself. Being aggrieved the Corporation has filed the present appeal.
2. Mr. K.N. Jena, learned advocate appearing for the appellant, has submitted that the borrower was the industrial concern Janata Coal Industry and Sk. Rasul Baksh was the surety. The said submission of Mr. Jena cannot be accepted. The proprietorship concern has no separate legal entity. Janata Coal Industry is just a business name and it cannot be the borrower. The real borrower is the proprietor Sk. Rasul Baksh. Moreover, from the documents, i.e., the deed of hypothecation and the deed of guarantee, it appears that the loan was advanced at the request of Sk. Rasul Baksh. Under Section 126 of the Contract Act a contract of guarantee is a contract to perform the promise, or discharge the liability, of a third person in the case of his default. The person who gives the guarantee is called the "surety". In the present case, there being no third person, the respondent cannot be a "surety". The court below correctly found that the respondent himself is the borrower and as such the remedy under Section 31 of the Act is not available for enforcing personal liability of the borrower.
3. Accordingly, I do not find any merit in this appeal and the same is dismissed. No costs.