Orissa High Court
Smt. Hiranyaprava Samantray vs Orissa State Financial Corporation And ... on 25 April, 1994
Equivalent citations: AIR1995ORI1, AIR 1995 ORISSA 1, (1995) 1 APLJ 28, (1995) 1 BANKCAS 376, (1994) 2 ORISSA LR 65, (1995) BANKJ 736
JUDGMENT P.C. Naik, J.
1. By this petition under Artciles 226/227 of the Constitution of India, the petitioner prays for issuance of an appropriate writ, direction or order quashing the notice dated 29-7-1993 Annexure 1 to the petition issued under Section 29 of the State Financial Corporation Act, 1951 (hereinafter for short as the 'Act'), requiring the petitioner to pay the short fall amount of Rs. 2,53,550.44 paise. The facts involved in this petition are simple.
2. The petitioner was a guarantor in respect of a loan of Rs. 1,75,300/- advanced to one Sri Bansoidhar Samantray by the Corporation. The loan was to carry an interest of 15.05 per cost. The petitioner by way of collateral security had mortgaged some pro-perties with the O.S.F.C. to secure the repayment of the loan. As the borrower defaulted in paying the instalments as per the agreement, the O.S.F.C. in exercise of power under Section 30 of the Act recalled the loan and the truck bearing Registration No. OSU 1918 was seized by the Corporation in exercise of the powers under Section 29 of the Act. The above facts are not disputed. The dispute between the parties is whether or not a notice under Section 29 of the Act was issued to the petitioner/guarantor regarding the intended action under Section 29 of the Act by the Corporation, The petitioner alleges that the truck was put to public auction in the year 1990 without serving any notice of the intended' sale on the petitioner. On the other hand, the contention raised on behalf of the opposite parties is that a registered notice was, in fact, served upon the petitioner. This is the bone of contention between the parties.
3. It is, however, an undisputed fact that even after realisation of the sale money, the amount realised by the Corporation fell short by Rs. 1,73,297.63 paise. It is at this point of time that an impugned notice (Annexure-1) to the petition was issued by Registered A.D. post calling upon her to clear the demanded dues with interest thereon within thirty days from the date of issue of the said notice; failing which the properties mortgaged by the petitioner in favour of the Corporation would be taken over by the Corporation in exercise of powers under Section 29 of the Act and put to sale for realisation of its dues. Accordingly, the petitioner has come up before this Couft for quashing the aforesaid notice (Annexure-I) to the petition.
4. Sri Section K. Dash, learned counsel for the petitioner contends that even though the liability of the petitioner who is a guarantor is co-extensive with that of the borrower and though the Corporation has a right to proceed against it, yet no action can be taken against her as no notice was served on her before the truck was put to auction. The learned counsel for the petitioner contends that the rules of natural justice and fair play demand that she is given due notice of the proposed auction so that if she so desires be present at the auction and to see and be satisfied that the best possible price is obtained. This is all the more necessary because by virtue of being a guarantor, the petitioner, incase of any short fall, could be proceeded against to make good the shortfall. It is contended that as the borrower and the guarantor stand on the same footing as regards the liability for repayment, they are to be treated alike in the matter of giving notice regarding the proposed action under Section 29 of the Act. As no notice was served on the petitioner, it is contended that the proposed action as per Annexure-1 cannot be sustained.
5. The opposite parties have filed the counter-affidavit opposing the petition. Sri B. K. Dash, learned counsel for the opposite parties contends that the petitioner being a guarantor has no locus standi to challenge the action of the Corporation under Section 29 of the Act. It is further contended that as the liability of the guarantor is co-extensive with that of the borrower, the guarantor cannot escape from discharging her liability on the ground that no notice was served on her at the time when the truck was put to auction. These submissions, it appears, are raised by way of Preliminary objections. On facts, it is contended that notice was, in fact, issued to the petitioner regarding the auction of the seized truck and further an advertisement regarding (he auction was also published in a local newspaper. It is further contended that before sale of the vehicle the guarantor was requested, vide registered letter No. 5488 dated 8-2-1990 to appear before the D AC which was to be held on 14-2-1990 for settlement of the loan dues and release of the vehicle but in spile of this notice neither the borrower nor the petitioner/guarantor appeared before the DAC on 14-2-1990for settlement of the dues. It was under these circumstances, according to the opposite parties, that action under Section 29 pf the Act was taken.
6. Having considered the contentions raised by the parties, we are of the opinion that the petition deserves to be allowed and the notice, dated 29-7-1993 (Annexure-1) is liable to be quashed. There can be no dispute to the proposition that the liability of a guarantor is co-extensive with that of the borrower. It cannot also be disputed that though Section 29 of the Act does not provide for issuance of any notice, the principles of natural justice and fair play are not excluded. In view of this, the two contentions which are more in the nature of preliminary objections deserve to be overruled. Indeed, this is now the settled position in view of the pronouncement of the Apex Court in the case of M/s. Kharavela Industries (Pvt.) Ltd. v. Drissa State Financial Corporation, reported in AIR 1985 Ori 153. Therefore, the opposite parties were duty bound to issue a notice regarding their intended auction under Section 29 of the Act.
7. In support of their contention that a notice under registered post was issued on 8-2-1990, a xerox copy of the notice has been filed as Annexure-A. A mere perusal of this document shows that it was sent by registered post with A. D. to "Sri Banshidhar Samantray." The endorsement in the notice shows that a copy was, amongst others, also marked to Smt. Hiranyaprava Samantray, the petitioner herein. As there was a dispute between the parties regarding issuance of this notice by registered post, we called upon the opposite parties to produce the Despatch Register. The entry 5488 in the Despatch Register shows that a notice under Registered A.D. post was sent to Bansidhar Samantray and a postal receipt has been affixed in the Despatch Register against the said entry. The subsequent entry does show that copies were sent to the R.T.O., Regional Manager, O.S.F.C., Branch Manager, O.S.F.C. and Smt. Hiranyaprava Samantray, the petitioner but no postal receipt is affixed against this entry nor is there any entry regarding the cost incurred by way of postage or otherwise. Indeed, in the column where the cost of postage is to be incurred, something written therein has been scored off. Thus, the contention of the learned counsel for the opposite parties in para 8 of the counter-affidavit "that before the sale of the vehicle the guarantor was requested vide our registered letter bearing No. 5488 dated 8-2-1990 to appear before the DAC to be held on 14-2-1990 for settlement of the loan dues and for release of the vehicle.......", does not appear to be correct. Had the notice been issued under registered post as alleged, the postal receipt would have been affixed against the entry like in the case of the borrower and, also the cost incurred towards postage charges would have found place in the appropriate column in the Despatch Register, In view of the above, we are of the view that registered retire as alleged, was not sent to the petitioner by the opposite parties. The contention of the petitioner, therefore, that action under Section 29 of the Act was taken without any notice to her deserves to be upheld. The question, therefore, is what would be the effect of this omission on the proposed action of the opposite parties against the petitioner/guarantor in terms of Annexure-1 is some what similar facts in the case of Balaram Das v. Orissa State Financial Corporation, OJC No. 3013 of 1992, decided on 8-7-1993, a Division Bench of this Court consisting of Hon'ble Mr. Justice L. Rath and Hon'ble Mr. Justice R. K. Patro have held as under:
"Since in law, the liability of the loanee and the guarantor stands on the same footing, the legal protections available to the loanee are also available to the guarantor. Since admittedly the petitioner had no notice of the taking over of the press to a third party, which is by now a fait accompli, there is no doubt that the interest of the petitioner has been grossly affected by the action of the opposite parties taken "behind his back. That being so, the further action taken under Section 29 of the Act to take over the property of the petitioner cannot be sustained in law nor can the demand be raised against him for recovery of the short-fall, though (sic) we must add that since the provisions of the Act were complied with so far as the loanee is concerned, the remedy against the loanee remains unaffected."
Under the circumstances, the proposed action contemplated against the petitioner by Annexure-1 cannot be sustained and Annexure-1 is thus liable to be quashed.
8. Before concluding, we may state that issuance of notice is not a mere formality and as both the borrower as well as the guarantor are entitled to notice, it is expected that the despatch would be by a method which ensures that the notices are, in fact, served on the borrower as also on the guarantor. To ensure this, it is necessary that notices are sent by registered A.D. post. This mode would not only ensure the service but would also probably do away with lot of litigation by the borrower or the guarantor challenging the action for want of notice.
9. In view of the above, the writ application is allowed. The opposite parties are hereby restrained from taking any action against the petitioner for realising the shortfall and the opposite parties are further directed to release the property mortgaged by the petitioner in their favour within a period of one month from the date of receipt of the order. It is, however, made clear that the opposite parties will be free to proceed against the borrower for realising its dues in accordance with law. Hearing-fee is assessed at Rs. 300/-.
L. Rath, J.
10. I agree.